The writing was on the wall for Bear as soon as Hank Paulson began his charm offensive in front of the flashing American television cameras.

The US Treasury Secretary expressed his “great confidence” in America’s financial institutions in a series of bullish interviews during a busy Sunday afternoon.

A former top Goldman Sachs banker, Mr Paulson drew on all his guile to try to reassure worried American viewers that their home loans were in safe hands and that the Federal Reserve “will do what it takes” to maintain the stability of its prized financial institutions.

As one of the world’s most influential economic players, his words were intended to soothe.

But in the background, Mr Paulson’s Fed, a well-oiled regulatory and financial machine, was playing a central role in the unprecedented financial drama that was unfolding around Bear Stearns. Mr Paulson later said he had spent almost two days glued to the telephone.

As Jamie Dimon, the chairman and chief executive of JPMorgan Chase, tried to orchestrate a rescue of Wall Street’s fifth largest bank, he assembled no fewer than 200 of his bankers to begin a two-day marathon examination of Bear’s financial affairs.

The former banking titan had stunned investors on Friday by admitting to a liquidity crisis after a rash of clients moved to pull funds. Bear, which famously refused to help to bail out Long Term Capital Management, the hedge fund, was forced to turn to, JPMorgan for a 28-day loan in conjunction with the Fed. A full takeover was always on the cards. But Mr Dimon needed a big-hitting team to examine all of Bear’s key clients and impending deals to justify the terms and a price.

During a tense afternoon of negotiations in the New York offices on Madi-son Avenue, both JPMorgan and Bear Stearns’ boards both met a handful of times, with advice being provided by Gary Parr, the financial institutions banker at Lazard.

Everyone involved was desperate to seal a deal ahead of the opening of the Asian markets and the potentially catastrophic knock-on effects of Bear’s funding woes.

In London, every key Bear executive for Europe had been called to the bank’s regional headquarters in Canary Wharf.

The band of about 50 bankers who headed for Canada Square that morning included Michel Peretie, the chief executive for Europe and Asia, and his close friend Yves Leysen, the head of fixed income.

Also there were Vincent van Pelt, co-head of equities for Europe, and his fellow equities boss Nicolo Brandolini d’Adda. They had been asked to make themselves available to JPMorgan’s army of forensic financial experts to offer any help that they needed to pull together a realistic view of Bear’s predicament.

More optimistically, they were sharing how the different parts of their businesses might be bound together. As the evening drew in, rumours that a deal was nearing began to circulate, with bankers already certain it would be well below the bank’s $30 closing price on Friday.

One Bear staffer close to the negotiations said that the atmosphere was convivial and workmanlike, with bankers “trying to get an idea of how the two might mix’n’match”.

Still, it was late on Sunday evening before the majority of Bear’s London managers were stood down and told they could go home.

It might have been inevitable that a deal was to be done with JPMorgan – with European banking sources claiming no other major player had expressed an interest - but the timing went down to the wire.

Within a matter of minutes of an agreement being struck, JPMorgan Chase rushed out a statement. Just half an hour later, Michael Cavanaugh, JPMorgan’s chief financial officer, was speaking on a hastily convened conference call, emphasising that he was “comfortable” with the quality of the bank’s assets.

Despite the Fed cutting its discount rate to banks to 3.25 per cent and the Bank of England offering a £5 billion liquidity injection, markets responded badly.

In Australia, the effects were immediate. The ASX tumbled 2.5 per cent. China and Japan followed suit on renewed fears about a worldwide financial crisis. Morning circulars from brokers to clients openly used the word “panic” in the e-mail subject lines.

The markets were consumed with the fear that the overnight Fed rate cut implied a secret rush to prop-up another major Wall Street firm.

In Japan, one of the best-read circulars said: “Folks – this is total melt-down. They are chucking everything at it to prevent major systemic collapse.”

London’s blue-chips opened almost 2 per cent down, with banking stocks such as Barclays, Alliance & Leicester and HBOS hammered.

The Bank of England revealed that demand for its cash injection was massive. At £23.6 billion, it outstripped supply by almost five times.

Wall Street shares seesawed, despite President Bush’s praise for the Fed's “decisive action”. Lehman Brothers was engulfed in rumours that it would be the next bank to go.

In Singapore, Lehman was forced to deny that some of its funding relationships were unravelling. In the US, its stock tumbled as much as 46 per cent in afternoon trading.

The Dow Jones industrial average dropped almost 200 points at the open, briefly flirted with hysterical optimism and moved into positive territory, before going into yo-yo mode.

Bear Stearns bankers arriving at work yesterday morning were welcomed by a $2 note stuck to the office doors, as a joke on the price per share for which it was being sold.

Few laughed, as they contemplated their evaporating bonuses.

24hrs in a banking crisis

Sunday 15, 2008

14:00 Henry Paulson, US Treasury Secretary, tries to reassure market in TV interviews

15:00 JPMorgan Chase bankers draft list of Bear Stearns deals and clients

16:00 Predictions resurface that the Fed will cut interest rates by up to 1% today

17:00 Sceptics question the future of Visa’s planned $15bn IPO

18:00 American buyout firm JC Flowers rumoured to be in the race for Bear

19:00 London bankers speculate a deal is close, but at far less than $30 a share

20:00 Cracks appear in Bear’s proposed $1bn venture with China’s Citic

21:00 Boards at both Bear Stearns and JPMorgan Chase meet in New York

22:00 JPMorgan declares formal deal at $2 a share

23:00 US Federal Reserve cuts “discount” loan rate to 3.25%

24:00 Yesterday JPMorgan executives say they are “comfortable” with the quality of the bank’s assets

01:00 Australian shares lose 2.5%

02:00 In Asia, Japan’s Nikkei index opens more than 3% down

03:00 Chinese stocks take their biggest one-day hit since January

04:00 In Shanghai, 60 stocks breach daily trading limits, while India’s Sensex falls 6%

05:00 In Singapore Lehman Brothers is forced to deny fresh liquidity rumours

06:00 Brokers suggest that European shares will open sharply lower

07:00 Gold touches $1,030 an ounce

08:00 FTSE slides almost 2%; Barclays, Alliance & Leicester and HBOS drop sharply

09:00 Bank of England prepares to lend £5bn of emergency three-day funds to shore up the UK financial system

10:00 Dominique Strauss-Kahn, the head of the International Monetary Fund, says global economic outlook is worsening

11:00 Bank of England says demand for its cash injection surges outstrips supply by nearly five times

12:00 In Vienna, Klaus Liebscher, a member of the European Central Bank’s governing council, says he is concerned about “excess volatility” in markets

13:00 In US premarket trading, Bear Stearns slumps 88% lower, to $3.69. Lehman Brothers predicted to drop 33%

14:00 The Dow Jones opens down nearly 200 points, ushering in a day of wild gyrations on the markets

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