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"The Federal Reserve has moved quickly to bring order to the financial markets," Bush said during a meeting with Treasury Secretary Henry Paulson and other economic advisors.

"We're in challenging times. But another thing is for certain -that we've taken strong and decisive action," he said.

"The United States is on top of the situation."

The Fed in an emergency meeting Sunday cut its lending rate to banks by a quarter-point to 3.25 per cent and created a new, temporary facility to make short-term loans to investment banks battling the tightening credit market.

The central bank also sanctioned the sale of Bear Stearns, the fifth-largest US investment bank, to JPMorgan Chase for 240 million dollars.

The sale price, at just 2 dollars per share, was about 10 per cent of the firm's worth last week. The Fed also offered JPMorgan up to 30 billion dollars to help cover the costs of tottering mortgage-backed securities it is taking over in the purchase.

Paulson said the emergency bailout was necessary for the investment bank to be saved from a bankruptcy that could have sparked similar troubles at other financial institutions, even if it proved a bad deal for shareholders.

"This was an easy decision, this was the right outcome," he told reporters after the meeting with Bush. "The outcome was much better than a (bankruptcy) filing by them."

A record number of foreclosures amid plummeting housing prices has forced billions of dollars in writedowns by mortgage lenders. The housing and credit crisis has fed a dramatic slowdown in the US economy overall.

Congress in January passed a 150-billion-dollar economic stimulus package to give tax rebates to consumers in an attempt to stimulate consumers pending, which drives 70 per cent of the world's largest economy.

The Internal Revenue Service on Monday said it would start sending out rebate cheques on May 2.

The Fed will get involved again Tuesday when it holds its regular rate-setting meeting. It is expected to drop its benchmark interest rate- different from the lending rate to banks and currently at 3 percent - by as much as 1 percentage point.

Bush insisted that US economic prospects and financial markets remained solid in the long term despite the current upheaval.

"Our financial institutions are strong and ... our capital markets are functioning efficiently and effectively," he said.

Paulson also reiterated that a strong dollar was in US interests after the US currency fell to record lows against the euro and other currencies in the last week.

But he said the dollar's weakness would be addressed by bolstering the US economy generally, and did not suggest an intervention by central banks to strengthen the currency was likely.

"Our economy has ups and downs," he said. "We have strong long-term fundamentals that will be reflected in our currency markets."

European Union leaders voiced strong concern Friday about the surge of the euro during a summit of finance ministers in Brussels. The world's largest major central banks last intervened collectively in 2000, buying up currency to rescue a then-struggling euro.

Democratic presidential hopefuls Hillary Clinton and Barack Obama both urged the Bush administration to take more action to ease the flood of home foreclosures by owners of subprime mortgages - variable interest loans given to individuals with poor credit ratings.

"Let's not forget about the millions of households with many millions of Americans, with the consequences that that has for the economy, as well," Clinton said.

Obama warned the United States may have already entered a recession and called for "fundamental change" in the management of the world's largest economy.//DPA