The US Federal Reserve measures are designed to calm financial markets and ease trading disruptions that could arise from a collapse of investment bank Lehman Brothers.
One of the biggest changes the Fed made was to accept equities as collateral for cash loans at one of its special credit facilities, the first time the Fed has done so in its nearly 95-year history.
The Fed's actions and an agreement by 10 of the world's biggest banks to set up a $US70 billion ($NZ104.6 billion) borrowing facility were intended to make sure market participants have ample access to cash while Lehman's affairs are wound down in markets over coming weeks or months.
Analysts said the Fed was increasingly making itself the lender of last resort for sorely stressed investment banks and seemed fearful the financial system was at risk of a meltdown as problems that originated in the US subprime mortgage sector spread.
ABN Amro Craigs broker Peter McIntyre said credit was increasingly hard to get.
"The key to all of this is the availability of credit. If you look at availability, 12 months ago, on a scale of one to 10, where 10 was 12 months ago, it is now about 2.5.
"A clean-out now is what the market wants. It doesn't want these continued bail-outs."
The investment banks had taken large bets on the US housing market and had come off second best.
Until there was an improvement in the housing data, volatility would continue, he said.
It was going to be an interesting week for markets.
Many of the Asian markets were closed yesterday for public holidays.
Markets in China and Hong Kong were closed for the mid-autumn festival, while those in Japan shut for Respect for the Aged Day.
South Korean markets closed for the Chusok holidayThe Australian markets were affected more than the NZX-50 because of the higher number of investment banks listed across the Tasman, Mr McIntyre said.
The Federal Reserve allowed a rare emergency Sunday trading session between Wall St dealers who had carried out transactions with Lehman Brothers that might be put at risk if the investment bank filed for bankruptcy, the International Swaps and Derivatives Association said.
Reuters reported that the Fed's steps were the latest in a series of aggressive actions dating back to last August aimed at keeping markets liquid and trading at a time mounting defaults on US mortgage debt were leading banks to recoil from providing credit.
In March, the central bank put up cash to facilitate JPMorgan Chase's takeover of Bear Stearns, concerned that letting the troubled investment bank collapse could trigger a system-wide crisis.
This time, the central bank - in three days of crisis talks at the New York Federal Reserve Bank - declined to put taxpayer funds on the line to prop up Lehman.
Instead, it moved aggressively to ensure any unwinding of Lehman's affairs would be as orderly as possible.
"In close collaboration with the treasury and the Securities and Exchange Commission, we have been in ongoing discussions with market participants, including through the weekend, to identify potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses," Fed chairman Ben Bernanke said in a statement.
"The steps we are announcing today, along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets," he added.
In addition to broadening the collateral it would accept from investment banks for direct Fed loans, the central bank said it was increasing the amount of treasury securities it auctions on a regular basis under one of its lending programmes.
Treasury secretary Henry Paulson, who worked throughout the weekend in New York in the bid to find a suitor for Lehman but who likewise refused to commit government funds to the effort, praised bankers for putting up money in a special fund to provide another source of liquidity as Lehman is shuttered.
"I particularly appreciate the efforts of market participants who came together this weekend and initiated a set of steps to facilitate orderliness and stability in our financial markets as we work through this extraordinary environment," Mr Paulson said in a statement.
The $70 billion facility arranged by a consortium of 10 banks aims to help foster an "orderly resolution" of derivative exposures between Lehman and its counterparties, the banks said in a statement.
The US Securities and Exchange Commission also pledged its efforts to make sure that customers of Lehman would not suffer in coming weeks.
As regulator of the nation's broker-dealers, the SEC oversees a number of programmes that aim to protect customers, including an offer of insurance, and it said it was in touch with global regulators to keep markets orderly.
The most striking new Fed action was its decision to accept equities as collateral for cash loans under its Primary Dealer Credit Facility for investment banks.
Until now, collateral was limited to investment-grade debt securities.
The Fed also said it was increasing the total amount that it offers under a separate programme that lends out liquid treasury securities to $US200 billion from $US175 billion.
It will also begin holding auctions under this programme more frequently.
In a third step, it would temporarily allow commercial banks to extend liquid funds to their brokerage affiliates for assets that would normally be accepted in tri-party repurchase agreements.
It said this would be permitted only until January 30, 2009, apparently reflecting the Fed's hope that stressed repo markets would be operating more normally by then.
The repo market is a way of borrowing or lending stock for cash, with the stock serving as collateral.
