HEATHER SCOFFIELD reports:

OTTAWA — The global credit crunch has now become a full-blown and rapidly deepening financial crisis that central banks are scrambling to contain, analysts say.

With the U.S. Federal Reserve taking more extraordinary measures over the weekend to mitigate the crisis and set financial institutions on a more stable footing, markets are on edge, with a wary eye on the U.S. dollar, financial stocks, and credit conditions around the world.

“It is very important for everyone to understand that we are making the transition from crisis prevention to crisis management,” said David Rosenberg, chief North American economist for Merrill Lynch.

The Bank of England also moved quickly Monday morning, offering £5-billion in three-day securities to grease the wheels of the British banking system.

Friday's bailout of Bear Stearns, through a unique combination of help from J.P. Morgan Chase and the Fed, was followed on the weekend by a sudden announcement from the Fed of more flexible lending arrangements for brokerages.

The Fed also announced an inter-meeting cut in its discount rate — not its key interest rate, but one that helps determine the price at which financial institutions can access credit.

Then, on Sunday night, J.P. Morgan Chase said it would buy Bear Stearns for the rock-bottom price of $2 (U.S.) a share.

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