The Federal Reserve's dramatic steps to shore up America's financial markets and avert a crisis of the global financial system had to be done. Not to have acted would have threatened a far more precarious situation on Wall Street and beyond. The Fed's moves, including making secured loans available to every major investment firm, were prudent steps to protect broader markets and instill confidence in the system.

The actions were announced Sunday as the Fed directed a negotiated sale of Bear Stearns, an investment house that found itself unable to borrow needed cash last week because of rumored losses on its subprime mortgage bond holdings. Bear Stearns was sold to JPMorgan Chase for $2 a share - a tiny fraction of its recent book value of $60 billion. That price offered frightening evidence of what can happen when confidence fails.

Critics of the sale complained Monday that Bear Stearns was bailed out despite making reckless subprime investments while mortgage holders have received little help. But, in fact, the Bear Stearns deal amounted to a fire sale in which shareholders lost nearly everything. And Fed officials said preserving the investment house's portfolio was vital to avoiding further market disruptions.

If other firms are targeted by nervous investors or markets are jarred by further reports of subprime losses, the Fed should be prepared to do more to keep markets functioning. Meanwhile, Congress should focus on finding more substantial help for subprime borrowers, including passing legislation that could provide them with bankruptcy court relief.

Another possibility for dealing with the more than $1 trillion in subprime mortgage loans currently outstanding might be to create a federal agency such as the Depression-era Home Owners' Loan Corporation, which bought defaulted mortgages at a sharp discount and then refinanced the bad loans on more equitable terms.

Congress and the Fed should also weigh the regulatory shortcomings that contributed to the current troubles.

Ordinary Americans have been shaken by the potential damage to the economy from the unfolding crisis. Their concerns are justified. The important thing to remember is that in time, things will improve as they have following past economic downturns, such as the recession triggered by the savings and loan crisis in the late 1980s.

But right now, the U.S. economy is fragile, and unless the Fed can convince the world that markets here are stabilizing, the resulting recession could be deeper and longer than any in recent years.