To see the mental state of financial
markets at the moment you need only to sit at a computer with an
Internet connection and watch investors respond to journalism.
On Tuesday morning Bloomberg News quoted an unidentified
person inside Lehman Brothers Holdings Inc. saying his firm had
tried and failed to raise capital from the Korean Development
Bank. This report came on the heels of an earlier one by Dow
Jones in which a named person who regulated the Korean
Development Bank denied such a thing had happened -- but no
matter.
A few minutes after Bloomberg News posted the piece, it was
the most-read news of the day, and Lehman's shares went into a
free fall. Fifteen minutes later they had lost almost half their
value.
What's interesting, among other things, is the total lack of
reflection in the markets. Who had heard of the Korean
Development Bank? Who knew what it did, or whether the people
inside it were shrewd assessors of subprime-mortgage portfolios?
Basically no one, I'd guess. And yet a single report from an
unnamed person inside Lehman that some Koreans had considered,
and then passed on, investing in the firm was enough to cause the
shares to crash.
And all that had really happened was that KBD proved it may
have finally grasped what should be for Asians a cardinal
investment principle: Never buy anything an American investment
banker is selling.....

In the last few days, employees of Lehman Brothers have wrung their hands as the value of their stock evaporated before their eyes. Now, many fear losing their jobs, too.

In scenes eerily reminiscent of the final days of Bear Stearns, the megawatt energy within Lehman Brothers has dimmed to a hum as employees focus on the fate of the firm and what it might mean to them. To make matters worse, pink slips for previously announced layoffs were being handed out this week.

“Everyone is walking around like they have just been Tasered,” said one Lehman employee, who, like many interviewed for this article, declined to be named because he was not authorized to talk publicly. “Everyone was always hoping we would pull through. Now, that is not really an option.”

On Lehman’s third- and fourth-floor trading floors overlooking Broadway’s lights in Midtown Manhattan, traders continued working at their terminals, or at least were giving the appearance of doing so. At the same time, many polished their résumés and contacted recruiters.....

Fearing that Lehman Brothers is only days away from collapse, government officials and senior Wall Street executives met on Saturday to try to arrest a downward spiral that might imperil other financial institutions.

For a second day, the group convened at the Federal Reserve Bank of New York in Lower Manhattan, but the situation remained fluid, and the talks were set to resume on Sunday morning.

Adding urgency to the meeting were growing concerns that other big financial institutions like the insurance giant American International Group and the nation’s largest brokerage firm, Merrill Lynch, might face a similar crisis and also need billions of dollars in capital to strengthen their businesses. The group discussed the financial condition of other firms beyond Lehman and the overall state of the markets.

The spreading troubles were the latest sign that even the government’s extraordinary interventions into private enterprise during the last year have not been enough to halt the unraveling of storied companies that were widely viewed as unassailable until recently.....

In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis while another prominent securities firm, Lehman Brothers, hurtled toward liquidation after it failed to find a buyer, people briefed on the deals said.....

The American International Group, the insurance company, is planning a major reorganization and a sale of its aircraft leasing business and other units to stabilize its finances, a person briefed on the company’s strategy said on Sunday.

A.I.G. became one of the focuses at an emergency gathering of Wall Street executives over the weekend, and was trying to arrange a capital infusion in the face of possible credit downgrades.....

"Lehman was only incompetent enough to blow up and destroy themselves, where as Bear's degree of incompetence was enough to threaten the entire financial system," Ritholtz said.

As important as it seems right now on Wall Street, this isn't a day that most Americans will remember as all that big of a deal.

When Lehman Brothers Holdings Inc. goes out of business, the reaction of the average citizen is either ``Lehman who?'' or, ``I heard of them! What do they do?''

It is a big deal, however, but not because some bond traders are out of work, or that puff pieces in business sections about Dick Fuld's survival skills turned out to be wrong. It's a big deal because this is the day that American financiers, from the point of view of the Asians who sit on top of the world's biggest pile of mobile capital, became a bad risk.

Not so bad as the Sudanese, perhaps, but certainly worse than the Chileans. According to the bankruptcy papers thrown together over the weekend, the list of Lehman's 30 biggest unsecured creditors is dominated by Asian financial institutions: Aozora, Chuo Mitsui Trust, Sumitomo Mitsui Financial, Mizuho Corporate Bank, Shinkin Central Bank, Bank of China and so on.....

Lehman Brothers Holdings Inc.'s employees worldwide are clearing their desks, waiting to hear if they'll be paid, and starting to look for work after the investment bank filed for the biggest bankruptcy in history.

``Everyone's talking on their cell phones, talking to headhunters,'' said Duo Ai, a bespectacled 26-year-old employee in fixed income quantitative research, as he stepped outside Lehman's Canary Wharf offices in London today. ``It's kind of chaotic. The only question remaining is whether we will get this month's pay check.''

The 158-year-old bank filed today for bankruptcy after Bank of America Corp. and Barclays Plc pulled out of rescue talks because the U.S. government balked at funding a bailout. That's left Lehman's 25,000 employees worldwide fearing for their livelihoods and some blaming Chief Executive Officer Richard Fuld for Lehman's collapse. Lehman's workers also own about a third of the bank's shares.

``People are angry,'' Ai said, clad in a beige shirt and dark blue tie. ``They thought the management messed it up. Any outcome would be better than this.''

Lehman employs about 6,000 in Europe, and today about 40 reporters, 10 camera crews and more photographers descended on the bank's 32-story glass and steel headquarters building, grabbing employees as they left.

A London-based Lehman spokeswoman declined to comment.

A 21-year-old Lehman graduate trainee in London, who declined to be identified by name, said he and 90 to 95 colleagues were called in by the human resources department and made redundant. They started work a week ago.....