No white knight emerges to rescue Lehman Bros.

NEW YORK -- Six months of pent-up anxiety over the fate of the financial system exploded into chaos on Wall Street this weekend, as the deepening credit crunch threatened to put a second major Wall Street firm out of business and had top government officials and bankers scrambling to avert a more serious crisis.

It was a wild weekend, full of intense negotiations at the offices of the Federal Reserve Bank of New York, one that drove home just how difficult it will be for the nation's banks and financial institutions to return to health.

Barclays, Britain's third-biggest bank, was the last of the potential white knights to nix a deal. Reports by Bloomberg News and others said Sunday night that Lehman was preparing to file for bankruptcy protection.

The failure to get a Lehman deal was due largely to the federal government's refusal to provide interested buyers such as Barclays with the kind of support that JPMorgan Chase received when it bought troubled investment bank Bear Stearns.

In that controversial deal, the Fed extended what amounted to a $30 billion loan to JPMorgan that reduced some of the risk. This time, the Fed put none of taxpayers' money on the line.

USA TODAY was unable to independently confirm either report.

"We are in a hysteria," says Richard Bove, banking analyst at Ladenburg Thalmann.

And that hysteria is creating concerns that today's market action may be turbulent.

The simple fact that the Lehman rescue didn't occur "will send shivers down the spines of investors," says Jack Ablin, chief investment officer of Harris Private Bank.

How severe is the crisis? Former Federal Reserve chairman Alan Greenspan, appearing on This Week with George Stephanopoulos, said: "It's a once-in-a-century type of financial crisis." Greenspan said he expects other financial institutions to fail.