America's 4th biggest investment bank, Lehman Bros, has filed for bankruptcy 158 years after it was formed. The bankruptcy followed the refusal of firstly the US Treasury and then its fellow investment banks to bail it out or buy it out. The full statement is here. The impending bankruptcy sparked a day of drama on Wall St, including the shock decision by Merrill Lynch to sell out to Bank of America to avoid following Lehman, the widening of new lending facilities by the Federal Reserve to including the acceptance of equity as collatoral, a desperate attempt by the world's biggest insurer AIG to borrow US$40 billion from the Fed to avoid collapse and the creation of a US$70 billion cash pool by 10 of the world's biggest banks to help other banks. Traders await the opening of markets in Europe and America with a combustible mix of fear and panic.
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