One of the best bank in USA, Bear Stearns has taken emergency funding in fear of one of the biggest collapse in the banking industry.

JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York’s backing.

JP Morgan is also trying to get long-term financing for Bear Stearns.

Bear Stearns’ problems stem from the global credit crunch and the worry is that other lenders may also have major funding problems, analysts said.

Withdrawn funds

Bear Stearns is Wall Street’s fifth largest investment bank, and has been at the centre of the US mortgage debt crisis. Recently, speculation had intensified that it was struggling to fund its daily business.

As a result, these funds rushed to withdraw their assets.

“The rescue of Bear Stearns demonstrates that the worst of the global credit crunch is not yet behind us,” he said.

He says that if Bear Stearns had been allowed to collapse, it could have put the whole financial system at risk.

Bear Stearns shares dropped as much as 53% on the news before finishing Friday trading down 46%.

‘Other banks’

The credit crunch was caused because banks became less willing to lend to each other after they suffered large losses on investments linked to the US housing market, and the sub-prime sector in particular.