New York, September 26:

Deadlock over a $700 billion bailout in the United States and the collapse of another institution

forced central banks to pump more money into markets today as analysts spoke of “extreme” tension threatening the banking system.

Shares fell in Europe and Asia as stock markets signalled alarm at the bitter breakdown of talks between the Republican and Democratic parties on a rescue deal. Market sentiment was dented by the forced $1.9-billion sale of giant US savings and loan institution Washington Mutual to JPMorgan Chase.

In Europe, shares in Fortis plunged for the second day and the Dutch-Belgian bank said it hoped to raise $14 billion from an asset sale. There are fears that talks between Republican and Democrat leaders might drag on through the weekend. President George W Bush warned: “We are in a serious economic crisis in the country, if we don’t pass a piece of legislation.”

The crisis which has ravaged Wall Street with the collapse of Lehman Brothers and forced the rescue of Merrill Lynch and American Insurance Group has become a central issue in the US presidential campaign.

Both candidates, Democrat Barack Obama and Republican John McCain attended the debt-deal talks which ended in rancour yesterday. Democrats accused McCain of sabotaging a deal for electoral ends. McCain responded that a deal had not been imminent.

The US Federal Reserve announced approval for European and Swiss central banks to push out another $13 billion and South Korea said it would offer $10 billion, taking total “swap” dollar facilities for foreign institutions to about $300 billion in two weeks.

The Bank of Japan injected $14 billion as part of a parallel central bank onslaught to keep short-term lending markets fluid and shore up confidence.

The European Central Bank said its action was intended “to address elevated pressures in the short-term US dollar funding markets.”

Denmark’s central bank said it had extended lending facilities for banks and mortgage groups to ease the pressure on tight liquidity.