Markets today: Lehman, other worries could wreak havoc

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

Late Sunday night, 10 leading banks announced they had created a special $70 billion lending pool for troubled financial institutions. And the Federal Reserve announced it would make it easier for the firms to borrow from it.

Talks to find a buyer for Lehman apparently stalled Sunday as Bank of America and Barclays Bank walked away. Its most likely fate: liquidation.

Also Sunday, Bank of America agreed to acquire Merrill Lynch for around $50 billion, according to a person with direct knowledge of the matter who declined to be named because he is not authorized to speak publicly. Bank of America and Merrill Lynch declined to comment about the deal. Merrill Lynch stock had fallen 12.3% to $17.05 Friday, as traders worried that Merrill could be the next firm caught in the vise of the credit crunch.

Lehman is an investment bank, so its bankruptcy could disrupt billions of dollars in financial transactions, spreading financial pain worldwide. Lehman account holders would be protected up to $500,000 by the Securities Investors Protection Corp.

"You don't know if the Dow will be up 300 points or down 300 points," says Richard Suttmeier, chief market strategist at ValueEngine.com. Futures on the Dow Jones industrial average fell 306 points Sunday. As Asian markets opened Monday, stocks and the dollar fell, and gold and U.S. Treasury bonds rose as investors sought safety.