The Federal Reserve, struggling to prevent a meltdown in financial markets, cut the discount rate on direct loans to banks on Sunday and became lender of last resort to the biggest dealers in U.S. government bonds, Bloomberg reported.

The central bank lowered the discount rate by a quarter of a percentage point to 3.25 percent, in its first weekend emergency action in nearly three decades. The Fed also will lend to the 20 firms that buy Treasury securities directly from it. In a further step, the Fed will provide up to $30 billion to JPMorgan Chase & Co. to help it finance the purchase of Bear Stearns Cos.

The move is Chairman Ben Bernanke’s latest step to ease a seven-month credit squeeze that has most likely pushed the U.S. into a recession. The dollar tumbled to a 12-year low against the yen and Treasury notes rallied as traders increased bets that officials will reduce their main rate by 1 percentage point when they meet tomorrow.

Opening up lending to firms other than commercial banks represents a shift in the Fed’s 94-year history. The so-called primary dealers to which the Fed is lending include firms that are units of commercial banks and several that aren’t, including Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. Inc.

The Fed is in effect assuming responsibility for managing the assets, a Fed official told reporters in a conference call. The central bank will manage the positions to minimize any market strains and maximize long-term value, said the official, who spoke on condition of anonymity. “These steps will provide financial institutions with greater assurance of access to funds,” Bernanke said during a conference call with reporters after the announcement.