Wall Street banks fight for life

by Sanjay Jha | September 14, 2008 at 10:30 pm

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It's bloodbath in stock market everywhere. The meltdown started after one of biggest investment bank on the Wall street Merrill Lynch was bought over by Bank of America. Merrill Lynch, the Wall Street investment bank, managed to seal a $44 billion deal to secure its long term future.

Wall Street was in turmoil on Monday as Merrill Lynch found shelter in a $44bn takeover by Bank of America and Lehman Brothers said it would file for bankruptcy.

BofA’s bold bid for Merrill came as the world’s top banks abandoned efforts to save Lehman and set out to build a firewall against further financial chaos with a $50bn liquidity pool to support other vulnerable institutions.

But same time as Lehman Brothers, a 158-year-old firm is struggling to find its feet after failing to to find any buyers. They are are going to file for bankruptcy. The prospect of a collapse of Lehman Brothers over-shadowed proceedings in London and in New York. Workers from banks in both financial centres were ordered back to their desks on Sunday to try to calculate their firm's exposure to a possible failed Lehman.

The filing is likely to cause thousands of job losses among Lehman’s 25,000-strong staff. On Sunday night a number of employees were seen leaving Lehman's Manhattan headquarters with boxes stacked with their possessions, stationery and even some paintings.

In a separate move, regulators had prepared the ground for a Lehman bankruptcy by asking its derivatives counter parties to settle trades between themselves in a special trading session in the afternoon.