WRAPUP 5-Fed ramps up year-end loans; global response urged

* Federal Reserve offers up to $900 bln in year-end loans

* Global interbank lending markets remain strained

* US officials eye steps to lift commercial paper market

* European leaders vow to take all necessary measures (Updates with Fed and Treasury mulling steps to help commercial paper market; Dow ends below 10,000)

By Mark Felsenthal and Patrick Rucker

WASHINGTON, Oct 6 (Reuters) - The U.S. Federal Reserve offered $900 billion in end-of-year lending on Monday and was searching for further ways to ease credit market strains as calls intensified for a coordinated global response.

Central banks from Kuwait to Canada pumped cash into the banking system as lending dried up, evidence that the year-long financial market turmoil was rapidly spreading well beyond its U.S. roots.

U.S. stocks took a pounding on growing concern that neither the Fed's efforts nor a $700 billion bailout would be enough to thwart a painful recession. The Dow Jones industrial average .DJI dropped 369.88 points, or 3.6 percent, to end at 9,955.50 -- marking its first close below 10,000 in four years. At one point, the Dow was down as much as 800 points -- a record intraday point drop for the blue-chip average.

The White House said it was watching the economic situation closely in both the United States and the world, and U.S. finance officials were working with their counterparts overseas to ease credit strains.

The U.S. central bank expanded the amount of money offered in its 28-day and 84-day Term Auction Facility -- or TAF -- auctions to $150 billion each, and increased the amount to be offered in two forward TAF auctions in November to $150 billion each to try to ease end-of-year funding strains.

In all, the Fed said $900 billion in TAF credit would be available for year-end needs. For details, see [ID:nWEQ000234]

COMPANIES STARVED FOR CREDIT

The U.S. central bank also said it would begin paying interest on the reserves that banks held at the Fed. The move, authorized by Congress as part of the $700 billion financial bailout, lets the Fed keep flooding markets with cash without driving its benchmark federal funds rate below target.

In addition, the Fed and the Treasury said they were working together to try to find ways to support term unsecured funding markets, where banks and other corporations turn for the cash they need for normal operations.

In Europe, the Bank of England and the European Central Bank combined injected $60 billion of overnight funds into the system, and demand outstripped the supply.

A slight fall in London interbank offered rates for three-month dollars on Monday provided a faint glimmer of hope that money market strains might be easing, but conditions remained poor and lending virtually non-existent across all maturities.  Continued...