Bear Stearns, the fifth largest investment bank on Wall Street, is set to be bought by rival JPMorgan Chase for a fraction of its closing share price on Friday.

JPMorgan has unveiled a $2 per share offer for Bear Stearns, which has become the United States’ first big casualty of the credit crunch that accounted for Britain’s Northern Rock.

The speed at which Bear Stearns has unravelled – it sought emergency central and private funding on Friday – has sent shockwaves through global markets.

JPMorgan’s acquisition has been accompanied by “special financing” from the Federal Reserve, which has pledged to fund up to $30 billion (£14.8 billion) of Bear Stearns’ less liquid assets.

The Fed has also cut its discount rate to 3.25 per cent, while interest rates are set to be cut be a further point tomorrow.

Today’s $236 million (£116 million) deal represents one-fifteenth of Bear Stearns’ share price on Friday and is a miniscule amount compared to its peak value of more than $170 (£83.9) per share during 2007.

“JPMorgan Chase stands behind Bear Stearns,” said the former’s chairman and chief executive James Dimon.

“This acquisition meets our key criteria: We are taking reasonable risk, we have built in an appropriate margin for error, it strengthens our business, and we have a clear ability to execute.”

Alan Schwartz, the president and chief executive officer of Bear Stearns, accepted the past week had been an “incredibly difficult time”.

“This transaction represents the best outcome for all of our constituencies based upon the current circumstances,” he said in a statement.

“I am incredibly proud of our employees and believe they will continue to add tremendous value to the new enterprise.”

The dollar has slumped to a record low against the euro following the sale of Bear Stearns, while Asian markets have reacted just as badly.