Washington - US President George W Bush on Monday warned that a "painful" series of short-term adjustments were needed in the financial sector but insisted the fundamentals remained strong despite the bankruptcy of Lehman Brothers Holdings.

Bush said he appreciated the work of the US Treasury and Wall Street firms in helping foster stability in financial markets, which have been hit hard by the ongoing credit crisis.

"In the short run, adjustments can be painful. In the long run, I am confident that our capital markets are flexible and resilient," Bush said in a brief statement at the White House.

Lehman Brothers became the largest casualty to date of the US financial crisis, filing for bankruptcy after a frantic effort to find a buyer for the fourth-largest US investment bank failed over the weekend.

The US Federal Reserve announced late Sunday that it would accept a wider array of securities as collateral for lending to struggling financial firms, while a group of 10 major banks set up an independent 70-billion-dollar fund to help keep the market afloat. (dpa)