The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England, and the Bank of Japan are among the participating authorities.

The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

“Today’s blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,” the chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, Chris Rupkey, said. On the other hand, “the Fed’s balance sheet is about to explode.” The MSCI World Index of stocks in 23 developed markets sank 6%, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.

European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said yesterday it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor’s 500 Index fell 3.8% and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.

Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago.