Lehman Bros. plans to file for bankruptcy
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 apparently put a second major Wall Street firm — Lehman Bros. — out of business and had top government officials and bankers scrambling to avert a more serious crisis.
The announce came at the end of 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.
Earlier in the weekend, Lehman, one of Wall Street's oldest and most-storied investment banks that had run into trouble by investing too riskily in real estate, failed to strike a deal with a number of potential bidders.
Barclays, Britain's third-biggest bank, was the last of the potential white knights to nix a deal.
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 that 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.
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