The New York Stock Exchange opened Monday with investment bank stocks seeing sharp losses following news that Bear Stearns, the venerable 85-year-old investment bank, is being bailed out of the credit crunch it helped engineer.

JPMorgan Chase announced late Sunday night that it is buying the ailing investment bank for just $2 a share after the Federal Reserve said it would help finance the transaction.

The all-stock acquisition, which has been approved by the federal government, amounts to to $236 million, a 93 percent discount on Bear Stearns’ closing price Friday on the New York Stock Exchange and just one percent of what the company was worth a few weeks ago. Last year, Bear Stearns was trading for more than $150 a share.

Bear Stearns' troubles began last July with the collapse of two of its hedge funds invested in securities tied to subprime loans.

The company was trading for about $70 a share last week, when investors withdrew $17 billion in two days as they became alarmed by reports of a cash shortage.

Of all the major investment banks, Bear Stearns was considered the most at-risk due to the collapse of the subprime mortgage market. It now becomes the first major bank to be undone by that collapse.

The purchase price includes Bear Stearns' headquarters on Madison Avenue in Midtown Manhattan.

The fire sale of the company was the biggest news on Wall Street Monday morning.

“This was a great organization that in the span of a few days, all of a sudden lost the ability to stand alone,” said Sarat Sethi of Douglas C. Lane & Associates.

Bear Stearns shares were trading above JP Morgan's offer Monday, indicating that investors think the company may have been undervalued in the weekend deal to save the company from bankruptcy.

The news sent jitters through all of Wall Street as many wondered if other banks would be next. While overall declines in stocks are not out of the ordinary, many of the big Wall Street firms got slammed Monday.

Lehman Brothers got hammered in a sign that investors think there's trouble ahead for that firm.

President George W. Bush tried to calm the markets. After meeting with Treasury Secretary Henry Paulson and other senior economic advisers, he said his administration is on top of the situation.

"We obviously will continue to monitor the situation and when need be, we will act decisively in a way that continues to bring order to that financial market," said Bush. "In the long run, our economy's gonna be fine. Right now we're dealing with a difficult situation."

Part of that action was a move by the Federal Reserve to shore up the credit markets after the news about Bear Stearns broke.

The Fed made an emergency quarter-point cut in its discount rate – the rate it charges on loans to commercial banks.

It also agreed to back up to $30 billion of Bear Stearns' assets and set up a program to provide cash to a wider range of big financial firms previously unable to borrow directly from the central bank.

“What this has done to other banks is to put them on super alert to say, if there were any holes that need to be plugged, let's do it right away,” said Sethi. “With the Fed now opening the discount window to investment banks that is going to also help other banks to figure out where they need the most help.”

JPMorgan officials have not said what will happen to Bear Stearns' 14,000 worldwide employees. Some expect at least half the company's employees can expect pink slips.

The Fed is scheduled to meet Tuesday on monetary policy. Analysts expect policy makers to cut the target for its key short term interest rate by as much as a full percentage point to 2 percent.