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Central Banks Fight Financial Crisis

US and Europe Move to Calm Plummeting Markets

Financial authorities tried to shore up confidence on Monday as world markets plummeted following "Black Sunday" on Wall Street where Lehman Brothers filed for bankruptcy protection and Bank of America took over Merrill Lynch.

Europe's big central banks pumped liquidity into the financial system to calm investors as markets plummeted on Monday after Lehman Brothers, the fourth-largest investment bank in the US, filed for bankruptcy protection.

The European Central Bank conducted a one-day tender for €30 billion and declared in a statement that it "stands ready to contribute to orderly conditions in the euro money market." The Bank of England and Swiss National Bank also provided liquidity as Asian and European stock markets tumbled.

The FTSEurofirst 300 index of leading European shares fell 5 percent, led by falling bank stocks such as UBS, down 10 percent. The Dax index of leading German fell as much as 4.7 percent to its lowest level in two years.

Fears of a global crash swept through markets on Monday after a rescue of Lehman failed over the weekend when Britain's Barclays Bank and Bank of America reportedly lost interest in taking over the bank after the US government refused state support for Lehman. The bank had incurred losses of billions of dollars on the US mortage market.

In a dramatic reshuffle on Wall Street, Bank of America also announced it was taking over Merrill Lynch for around $50 billion.

The German finance ministry, the Bundesbank central bank and the Bafin financial supervisory authority all tried to restore calm in German markets with a joint statement saying the exposure of German banks to Lehman was manageable.

The US Federal Reserve said for the first time it would accept stocks in exchange for cash loans and 10 of the world's top banks agreed to set up a $70 billion emergency fund, with any one of them able to tap up to a third of that.

"It's just shockingly fast how it happened," an employee for Merrill in Asia said. "It's hard to believe there will be no more Merrill Lynch," he said of his firm, Reuters reported.

The euro jumped to as high as $1.4479, up 1.7 percent from Friday. Gold prices rose and the Swiss franc also appreciated, on safe haven buying.

cro -- with wire reports.