Fed pumps in $38B as markets slide
  a.. NEW: Fed injects $38 billion in three cash infusion to calm markets

  b.. U.S. stocks slide again after pulling back sharply from Friday morning 
plunge

  c.. Investors sell off shares of financial companies and industrial 
conglomerates

  d.. European markets close down 3 percent; worst one-day loss in four years

LONDON, England (Reuters) -- The U.S. Federal Reserve provided the banking 
system with $38 billion Friday, the largest amount of liquidity since the days 
after the Sept. 11 attacks six years ago, adding ample funds for the second day 
running as financial markets fretted over credit conditions.

The Fed also took the unusual step of making a rare statement after the first 
operation -- the first time it's done so since the Sept. 11, 2001, terror 
attacks -- in an effort to calm investors' fears.

Before Wall Street's opening bell, the Fed infused $19 billion in a market 
operation that was conducted more than an hour before its usual time.

By mid afternoon, the Fed conducted two more cash injections -- $16 billion and 
$3 billion -- a highly unusual but not unprecedented occurrence for a Friday.

U.S. stock indexes sharply cut their morning losses after the Fed's second 
liquidity injection but losses accelerated after the third injection.

Shares of industrial conglomerates were among the top drags on the Dow and the 
S&P 500 index. General Electric Co., was down 2.8 percent at $37.84. The Dow 
Jones industrial average was down 75.12 points, or 0.57 percent, at 13,195.56. 
The Standard & Poor's 500 Index was down 4.67 points, or 0.32 percent, at 
1,448.42. The Nasdaq Composite Index was down 16.73 points, or 0.65 percent, at 
2,539.76.

Besides the Fed's cash infusions, the European Central Bank, the Bank of Japan 
and the Bank of Canada also injected additional liquidity into financial systems 
to calm markets on Friday -- although European markets suffered their biggest 
one-day percentage decline in more than four years.

In its statement after Friday's first market operation, the Fed said it would 
provide liquidity as needed "to facilitate the orderly functioning of financial 
markets.

"In current circumstances, depository institutions may experience unusual 
funding needs because of dislocations in money and credit markets," it said.

The last time the central bank made a similar statement was after the Sept. 11, 
2001, terror attacks, when it also said it would do what was necessary to keep 
markets functioning normally. The Fed made a similar vow in October 1987 
following a precipitous decline in U.S. stock markets.

Central banks worldwide have now injected at least $326.3 billion in the past 48 
hours to prevent markets from spinning into a global liquidity squeeze. 
Short-term interest rates spiked in response to banks' decreased willingness to 
lend to each other.

The Fed has now added a total of $38 billion of temporary reserves to the 
banking system through 3-day repurchase agreements. That was the largest single 
day amount since a $50.35 billion infusion on Sept. 19, 2001.

That followed Thursday's total injection of $24 billion in two separate 
operations.

"Today's action indicates that (Fed policy-makers) are being more pro-active to 
ensure financial stability," said David Katz, chief investment officer at Matrix 
Asset Advisors in New York.

The fed funds rate was trading at 6 percent in early morning trade, but fell 
back to 5.25 percent shortly after the operation, in line with the target set by 
the central bank. It was last trading at 5.25 percent.

The Fed said all of the collateral accepted in the 3-day repos on Friday was 
mortgage-backed debt.

The Fed added a total of $87.5 billion to its reserves this week, compared with 
a total of $50.25 billion last week.