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The Federal Reserve released documents Friday providing insights into its private deliberations in March that led to those controversial decisions. The Fed's actions came at a time when credit and financial problems were intensifying, threatening to paralyze the entire financial system and plunge the economy into a recession.

Given the fragile conditions of the financial markets at that time, the Fed said it felt compelled to intervene because an "immediate failure" of Bear Stearns would bring about an "expected contagion."

Fed Chairman Ben Bernanke and his colleagues initially moved on March 14 to provide temporary emergency financing to investment bank Bear Stearns Cos. (BSCPG) through an arrangement with JP Morgan Chase & Co. Two days later as the investment bank teetered on the brink of bankruptcy, the Fed agreed to provide backing for up to $30 billion of a deal where JP Morgan would take over the troubled company.

That same day - March 16- the Fed said it would allow big Wall Street firms to go directly to the Fed for emergency loans, a privilege only commercial banks had enjoyed. It was the broadest use of the Fed's lending powers since the 1930s.

The Fed's decision to take this action was "based on recent, rapidly changing developments," the documents said. "These developments demonstrated that there had been impairment of a broad range of financial markets" that Wall Street firms rely on for financing.

There was fear that other Wall Street firms could become in jeopardy, sending problems cascading through the financial system.

Democrats in Congress and other critics contend the Fed's actions are akin to a government bailout and are putting billions of taxpayer dollars at risk.

However, Bernanke has defended the actions and in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.

The Fed's financial lifeline in JP Morgan's takeover of Bear Stearns was subsequently changed to $29 billion and - most recently - to $28.82 billion.

The documents said that the Fed, in discussions on March 16, believed that the takeover - and its involvement in helping to bring it about - was "necessary to avoid serious disruptions to financial markets." The Fed said that "many potential investors" had been invited to back Bear Stearns but the investment firm determined that JP Morgan was "the most suitable bidder."

Bear Stearns began to unravel last year when two hedge funds it managed collapsed because of heavy bets on subprime mortgage securities, which soured when the housing market fell into a deep slump. Along with other big investment banks, it was forced to take multibillion-dollar write-downs on the bad investments. Then rumors in mid-March about the company's cash position triggered a run on the investment bank that left it close to bankruptcy.

Earlier this month, JPMorgan closed its acquisition of Bear Stearns, bringing to an end an 85-year old institution.

Home foreclosures and late payments set records over the first three months of the year and are expected to keep rising, stark signs of the housing crisis' mounting damage to homeowners and the economy.

The latest snapshot of the mortgage market, released Thursday, showed that the proportion of mortgages that fell into foreclosure soared to 0.99 percent in the January-through-March period. That surpassed the previous high of 0.83 percent over the last three months in 2007.

The report by the Mortgage Bankers Association also found that more homeowners slipped behind on their monthly payments.

The delinquency rate jumped to 6.35 percent in the first quarter, compared with 5.82 percent for the three months earlier. Payments are considered delinquent if they are 30 or more days past due.

Both the rate of new foreclosures and late payments were the highest on record going back to 1979.

Jay Brinkmann, the association's vice president of research and economics, told The Associated Press that the slump in house prices was the biggest factor for rising foreclosures and late payments.

With prices expected to keep dropping, foreclosures and late payments "are going to continue to go up" in the months ahead, he said.

Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers also swelled to all-time highs in the first quarter.

The percentage of subprime adjustable-rate mortgages that started the foreclosure process climbed to 6.35 percent. The rate was 5.29 percent in fourth quarter, the previous high. Late payments rose to 22.07 percent from 20.02 percent, the previous high.

The association's survey covers just over 45 million home loans.

More problems also cropped up with loans to more creditworthy borrowers.

The percentage of such loans falling into foreclosure was 0.54 percent, compared with 0.41 percent at the end of last year. Late payment rose to 3.71 percent, compared with 3.24 percent.

The numbers were higher for prime borrowers with adjustable rate mortgages. The proportion of those loans falling into foreclosures jumped to 1.55 percent from 1.06 percent. The delinquency rate rose to 6.78 percent, compared with 5.51 percent.

"The number one problem is the drop in home prices," Brinkmann said. Declining prices, especially in newer built areas, "are hurting people's ability to recover when they run into trouble - a divorce or loss of job," he said. "In other days, you could sell the home. But because home prices have fallen so much, in many of those cases, the homes are going into foreclosure."

California, Florida, Nevada and Arizona accounted for 89 percent of the total increase in new home foreclosures, he said. Those are places where prices have fallen sharply and there was a lot of home building, creating too much supply, Brinkmann said.

After a five-year boom, the housing market fell into a deep slump two years ago. That dragged down sales, and prices with it. As the value of homes plummeted, many newer homeowners found themselves owing more on their mortgages than their homes were worth.

Homeowners with adjustable-rate mortgages were clobbered when their initially low rates reset to much higher ones. That made it difficult, if not impossible, to keep up with monthly mortgage payments.

As foreclosures and late payments climbed, financial companies took multibillion losses when their investments in mortgage-backed securities soured. A credit crisis erupted and spread, crimping other types of financing. The fallout plunged Wall Street in turmoil, disrupting the normal functioning of markets.

All those troubles have pushed the economy to the brink of a recession, if the country isn't already in one. Consumers and business have tightened their spending. Employers have cut more than a quarter-million jobs in the first four months of this year.

To bolster the economy, the Federal Reserve made aggressive interest rate cuts. That has helped homeowners facing rate resets on their adjustable-rate mortgages. But with inflation on the rise, Fed Chairman Ben Bernanke this week sent his strongest signal yet that the central bank's rate-cutting campaign started that started in September is coming to an end.

The Bush administration has taken steps to help distressed homeowners. It has urged lenders to freeze rates for some homeowners and encouraged lenders to rework mortgage terms so troubled borrowers can stay in their homes.

A congressional plan that includes a foreclosure prevention program has stalled as lawmakers figure out how to pay for it.

The government would back as much as $300 billion in new loans to help certain borrowers refinance into cheaper, fixed-rate loans. Mortgage holders would have to agree to take a substantial loss on the existing loans; borrowers would have to show they could afford the new mortgage and share future proceeds with the government.

The House passed its version last month. Senate leaders say they want to vote by July.

Groups representing builders and real estate agents want incentives, such as a $7,500 temporary tax credit for first-time home buyers, to support the market.

"Policies that stimulate home purchases in the immediate future can pay huge dividends and a temporary home buyer tax credit provides the most bang for the buck," Joe Robson, a home builder from Tulsa, Okla., said in prepared remarks at a House hearing.