GOLFMK8
GOLFMK7
GOLFMK6
GOLFMKV

End of the road for Lehman Bros.

fairladyz_gt-r

Go Kart Champion
http://edition.cnn.com/2008/BUSINESS/09/15/lehman.merrill.stocks.turmoil/index.html

Financial turmoil as top bank collapses
Story Highlights
U.S. investment banking giant Lehman Brothers to file for bankruptcy

Lehman had incurred billions of dollars of losses in the U.S. mortgage market

Merrill Lynch agrees to be taken over by Bank of America

Asian markets tumble amid U.S. financial turmoil

NEW YORK (CNN) -- Global markets were reeling Monday after a convulsive day on Wall Street that saw a leading U.S. investment bank file for bankruptcy and others scramble to merge as the credit crunch claimed one of its biggest victims yet.

In developments that will profundly change the American banking landscape, Lehman Brothers announced its collapse after a wild three-day battle to save venerable investment firm.

Meanwhile, Bank of America -- which had originally been tipped to bail out Lehman -- agreed to buy ailing Merrill Lynch in a deal said to be worth $40 billion.

The fast-paced changes capped a roller-coaster weekend for a Wall Street already concussed by woes at other major financial firms and mortgage-financing titans Fannie Mae and Freddie Mac.

"This crisis is clearly deeper than anybody had imagined only a short time ago," Peter Stein, an associate editor at the Wall Street Journal in Asia, told CNN.

At one point the U.S. Federal Reserve was forced to step in, announcing plans to loosen lending restrictions to the banking industry in an effort to calm markets, while a consortium of 10 leading domestic and foreign banks agreed a $70 billion fund to lend to troubled financial firms.

Sound off: What do you think?

In another development, American International Group, the world's largest insurer, was reportedly struggling to secure billions of dollars in capital after months of seeing its share values slide.

Markets plunged into negative territory Monday. Major Asian indexs were closed bbut ndia's Sensex fell 5.4 percent, Taiwan's benchmark dropped 4.1, Australia's key index was down 2 percent and Singapore fell 2.9.

In Europe,FTSE index in London declined 2.8 percent while the Paris CAC 40 was down 3.5 percent in early trading, with Wall Street expected to follow suit. Read story

Police cordoned off Lehman's headquarters in New York on Sunday as staff, some in suits, others in casual clothes, left the building with cardboard boxes while tourists and onlookers gathered to watch the spectacle.

The 158-year-old bank, which has weathered previous financial upheavals and saw its offices destroyed in the September 11 World Trade Center attacks, filed for Chapter 11 bankruptcy, which grants protection while it works out a plan to pay back creditors.

On Monday, the British operations of Lehman were placed under administration, according to accounting firm PriceWaterhouseCoopers.

The collapse of Lehmans came after weeks of speculation over its future. It took a turn for the worse Sunday when Bank of America and British bank Barclays, both viewed as potential "white knights," pulled out of deal talks, sources told CNNMoney.com. Watch the impact on global markets from Lehman's financial woes »

Both Lehmans and Merrill have been caught with huge exposures to unsecured mortgages, the bad debts at the heart of the so-called credit crunch that has devalued the U.S. housing market and sent financial shockwaves worldwide.

Lehman's collapse and the sale of Merrill reduces the number of independent firms on Wall Street to two -- Morgan Stanley and Goldman Sachs -- following the sale of Bear Steans to JP Morgan at a bargain price earlier this year.

"Acquiring one of the premier wealth management, capital markets and advisory companies is a great opportunity for our shareholders," Bank of American Chairman and Chief Executive Officer Ken Lewis said in a statement Monday.

"Together our companies are more valuable because of the synergies in our businesses."

Like Lehman, Merrill Lynch has been suffering from bad real estate bets, and its stock price lost 27 percent last week -- shares are down 65 percent this year.

In a bid to prevent further turmoil, the U.S. Federal Reserve Sunday announced a series of steps to support the financial markets. The Fed said it would expand its short-term lending to banks by starting to take all investment-grade debt as collateral.

"The steps we are announcing today, along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets," said Fed Chairman Ben Bernanke.

Treasury Secretary Henry Paulson, who has led efforts to help get the U.S. housing market and the economy back on track, welcomed the moves.

"These initiatives will be critical to facilitating liquid, smooth functioning markets, and addressing potential concerns in the credit markets," he said in a statement.

On Monday, the European Central Bank said it has has pumped $42.6 billion into money markets to calm jitters over Lehman, The Associated Press reported. The Bank of England in London said it offered up nearly $9 billion in a three-day auction.

David Ellis of CNNMoney.com contributed to this report
 
Top