With Bear Stearns Cos.' temporary rescue in place, the $200 billion subprime crisis joins the history of government bailouts to preserve jobs, homes and savings when economic disaster looms.

Ever since Treasury Secretary William Gibbs McAdoo shut the New York Stock Exchange for four months in 1914, to prevent foreign investors from cashing out and throwing the U.S. into financial chaos at the outset of World War I, American policy makers routinely have suspended their support for free markets when confronted by economic peril.

``I think the systemic risks dominate right now, which means you've got to put your finger in the dike,'' says William Silber, a finance professor at New York University's Stern School of Business. He is the author of ``When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America's Monetary Supremacy'' (Princeton University Press, 232 pages, $27.95).

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Bailouts can buy time while policy makers try to defuse panic. Last week, the Federal Reserve Bank of New York provided financial support for Bear Stearns, the fifth-largest U.S. securities firm. It faced eroding investor confidence in the fallout from losses related to securities based on mortgages to the least creditworthy borrowers.

Bear Stearns executives were striving today to strike an agreement to sell the firm to JPMorgan Chase & Co. before financial markets open tomorrow, people with knowledge of the talks said.

Emergency Funding

JPMorgan and the Fed said last week they would back New York-based Bear Stearns with emergency funding for an initial period of up to 28 days in the largest U.S. bailout of a securities firm. The deal is part of an agreement that enables the investment bank to borrow from the New York Fed's discount window while all three seek permanent financing or alternatives.

Bear Stearns needed the support in response to ``a multitude of market rumors regarding our liquidity,'' said Chief Executive Officer Alan Schwartz.

Just over 100 years ago, John Pierpont Morgan himself, the namesake of what was then known as the House of Morgan, came to the rescue when panic selling in October 1907 convulsed the New York Stock Exchange and threatened several banks and trusts.

Morgan, 70 and semi-retired, obtained an emergency pledge of $25 million from the U.S. Treasury. He persuaded New York's leading bankers and trust executives to put up another $25 million, after locking them in his library all night, according to ``The House of Morgan: An American Banking Dynasty and The Rise of Modern Finance,'' by Ron Chernow (Atlantic Monthly Press, 812 pages, $45.95).

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