JPMorgan Chase announced that is acquiring The Bear Stearns Companies after the board of directors of both companies unanimously approved the transaction.

"The transaction will be a stock-for-stock exchange. JPMorgan Chase will exchange 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock. Based on the closing price of March 15, the transaction would have a value of approximately two dollars per share," the statement said.

"Effective immediately, JPMorgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations," it said.

The deal requires shareholder approval. The sale would be for some 236 million dollars, a tiny fraction of the stock market value of 3.54 billion dollars on Friday.

The deal comes after Bear Stearns, among the hardest hit by the collapse of the US subprime, or high-risk mortgage market, said Friday it was obtaining an emergency loan from JPMorgan Chase backed by the US Federal Reserve after its liquidity position had "significantly deteriorated".

The Fed meanwhile pledged "to provide liquidity as necessary to promote the orderly functioning of the financial system" -- a statement that highlighted concerns about the credit squeeze and its wider impact on the banks.

The Fed has poured hundreds of billions of dollars into the financial system and slashed interest rates by 2.25 percentage points since September to battle the credit crunch that is threatening the US economy with recession.

President George W. Bush last month signed a 168-billion-dollar economic stimulus and the government and banks have introduced a number of initiatives to help homeowners faced with losing their homes amid tightening credit, job cuts and a slowing economy.

U.S. ready to act to calm markets - Paulson

Treasury secretary defends Fed's decision to loan money to troubled Bear Stearns and says Bush administration will 'do what it takes' to help economy.

WASHINGTON (AP) -- The Bush administration will "do what its takes" to stabilize chaotic markets and minimize the economic damage, Treasury Secretary Henry Paulson said Sunday after a tumultuous week capped by the government rescue of a teetering investment bank.

All eyes now are on Wall Street as leading financial advisers prepared for a Monday meeting with President Bush and the Federal Reserve weighs another deep interest rate cut Tuesday to stem even more deterioration.

Paulson, in a series of news show appearances, defended the Federal Reserve's extraordinary step Friday to provide emergency financing to one of Wall Street's most venerable firms, Bear Stearns Cos. The central bank's intervention was "the right decision," he said.

The treasury chief sidestepped questions about what would have happened if the Fed had not ridden to the rescue, whether other firms are on shaky ground and the possibility of additional bailouts similar to Bear Stearns'.

At the same time, however, Paulson sought to send a calming message that the administration is on top of the turbulent situation. "The government is prepared to do what it takes to maintain the stability of our financial system," he said. "That's our priority."

Bear Stearns talks continue

Bush planned to meet on Monday with his advisory panel on financial markets, whose members include Paulson and Fed Chairman Ben Bernanke. The panel on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into the first recession since 2001.

Consultations about the Bear Stearns situation continued through the weekend and involved the Treasury Department, the Fed, financial institutions and others. "I've been very involved, you know, been on the phone for a couple days right now helping to work through this," Paulson said. He offered no details.

Economists increasingly believe the spreading fallout from a severe credit crisis has pushed the country into recession. The situation has led to record-high home foreclosures, forced financial companies to take multibillion losses from bad mortgage-linked investments and rocked Wall Street.

"No one is debating the fact that this economy has slowed way down," Paulson said. "We feel it, we know it, the American people know it."

To help shore things up, the Fed is poised to make a big cut to its key interest rate, now at 3 percent. Some economists are predicting a reduction of one-half a percentage point, while others are calling for a more hefty cut of three-quarters to a full percentage point.

The Fed used a Depression-era procedure to come to Bear Stearns' aid along with JPMorgan Chase & Co. (JPM, Fortune 500) Bear Stearns had made a fortune in mortgage-backed securities but faced a possible collapse after those investments soured. Wall Street nose-dived as fears spread about whether other big firms were in jeopardy.

"I really support the Fed's work here," Paulson said during one of his three broadcast appearances. "To me, this was not difficult because the priority in a time like this has got to be the stability of our financial system and minimizing the likelihood that this disruption spills over into the real economy.

'Aware of moral hazard'

Some critics contend the Fed's move was akin to a government bailout - something the administration has repeatedly said it is against.

"We're very aware of moral hazard," Paulson said. "But our primary concern right now - my primary concern - is the stability of our financial system, the orderliness of the markets. And that's where our focus is," he said.

The financial system, he said, is "more fragile than we would like right now."

Asked whether other financial companies may be in a situation similar to Bear Stearns', Paulson did not directly answer. He did seek to strike a confident tone. "Well, our financial institutions, our banks and investments banks are very strong," he said. "And I'm convinced that they're going to come out of this situation very strong."

The government will tackle any other problems that may arise, he said.

"From the beginning I have said, as we work through this period, if this was like other times in the past, there are going to be bumps in the road. There are going to be unpleasant surprises. You are going to find that an institution or so has problems. And when they do have problems, you work to deal with it," Paulson said.

Bear Stearns (BSC, Fortune 500) is one of four big players on Wall Street set to report first-quarter earnings this week: Bear on Monday; Goldman Sachs Group Inc. (GS, Fortune 500) and Lehman Brothers Holdings Inc. (LEH, Fortune 500) on Tuesday; and Morgan Stanley (MS, Fortune 500) on Wednesday.

Next steps for the economy

On other matters, Paulson was cool to the need for additional economic stimulus, which congressional Democrats are promoting. A recently enacted aid plan includes tax rebates for people and tax breaks for businesses. Paulson said it should help bolster the economy and produce 500,000 to 600,000 jobs this year.

To Democrats, though, Bush is not doing enough to help.

"We're in the most serious economic problem we've been in in a very long time, much worse than 2001. The president's hands-off attitude is reminiscent of Herbert Hoover in 1929, in 1930," said Sen. Charles Schumer, D-N.Y. "There are lots of things that can be done, particularly on housing. Housing has been the bull's eye of this crisis."

House Speaker Nancy Pelosi, D-Calif., said, "Much of what the administration has done has been too late."

On the plunging value of the U.S. dollar, Paulson stuck to the position of past treasury chiefs when he said a strong dollar is in the national interest. The dollar has dropped to a new low against the euro and a fallen sharply against the Japanese yen. That helps sales of U.S. exports to foreign buyers because it makes U.S. goods less expensive. But the drooping dollar increases inflationary pressures.

Paulson appeared on ABC's "This Week," "Fox News Sunday" and "Late Edition" on CNN. Schumer was on Fox and Pelosi on ABC. 

Realtors say January's Pending Home Sales Index was unchanged from December, contrary to the consensus expectation of a 1% slide.

NEW YORK (CNNMoney.com) -- Mortgage rates rose across the board this week as lower home prices and mortgage rates contributed to a more affordable market for homebuyers, Freddie Mac reported Thursday.

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.13% for the week ending Thursday, up from 6.03% last week.

Last year at this time, the 30-year rate averaged 6.14%, Freddie Mac said.

"The combination of lower house prices and lower mortgage rates contributed to a more affordable market for homebuyers," said Freddie Mac (FRE, Fortune 500) vice president and chief economist Frank Nothaft in a statement Thursday.

"The National Association of Realtors reported that January's Pending Home Sales Index held unchanged from December, contrary to the consensus expectation of a 1% slide, signaling that existing home sales in February could hold steady from January's level," Nothaft added.

Freddie Mac also said 15-year fixed-rate loans averaged 5.60%, up from 5.47% last week. A year ago, the 15-year rate averaged 5.88%.

Rates on five-year adjustable-rate mortgages (ARMs) averaged 5.58%, up from 5.34% last week. A year ago, the 5-year rate averaged 5.90%.