Its namesake ended one financial crisis a century ago. Now J.P. Morgan Chase, with the help of the Federal Reserve Bank of New York, is trying to help stem another.

J.P. Morgan is providing a lifeline to Bear Stearns, whose shares have been battered in recent days by worries that the firm may have liquidity problems. J.P. Morgan is borrowing funds through the discount window of the Federal Reserve Bank of New York, and re-lending them to Bear for up to 28 days. The Fed will be responsible if Bear's collateral deteriorates in value.

In a conference call with investors this afternoon, Bear Stearns C.E.O. Alan Schwartz and C.F.O. Sam Molinaro sought to calm the fears of their clients and shareholders. Schwartz said that the "rumor and innuendo" about a liquidity crisis at the firm earlier this week were unfounded, but their account holders obviously felt compelled to protect themselves in spite of that reassurance.

Cash outflows from the firm's prime brokerage and repo accounts accelerated dramatically yesterday, especially late in the day, Schwartz said. They turned to J.P. Morgan for help because it is the clearing agent for Bear Stearns, and could act quickly. Moreover, it was "easy for them to see the kind and quality of our available collateral," Schwartz said.

The executives offered little in the way of details on their capital ratios, except to say they are "in good shape." Bear will announce its quarterly earnings on Monday afternoon, several days earlier than planned, and it will update analysts on its financial situation then.

Bear Stearns also declined to provide detail on the amount of the J.P. Morgan loan, but insisted it was enough to cover outflows while Bear attempts to shore up confidence. Schwartz called it "a bridge loan to a permanent solution." 

While the move is intended to shore up Bear Stearns, it provided little comfort to investors. Shares of Bear fell in value by about 47 percent. The news also pulled the overall market down with the Dow Jones industrial average falling off 195 points. 

J.P. Morgan added that it was working with Bear on finding permanent financing "or other alternatives for the company," which could be read as a possible sale. Bear Stearns said it will also continue using the services of Lazard to help it find strategic alternatives.

While Bear executives sought to lay the blame on "rumor," Edward Hadas on  Breakingviews.com says that firm is at fault for letting itself become vulnerable to rumor. While other Wall Street firms shored up their capital base through deals with sovereign wealth funds, "Bear did almost nothing."

As the smallest of the major investment houses on Wall Street and the one whose trading business was the most directly tied to the subprime-mortgage market, Bear has been seen as vulnerable to the credit crisis. Two of its hedge funds blew up last summer, and in January, the firm replaced longtime chief executive James Cayne with Schwartz.

A number of commentators have noted that Bear is as leveraged as the Carlyle Group affiliate Carlyle Capital, which has collapsed amid margin calls and repossessions by its lenders.