The intense storm created by the credit crisis that pounded the financial sector for the past year and resulted in the collapse of Bear Stearns claimed two more victims this weekend. Lehman Brothers, which was surrounded by possible sale or Fed bailout rumors on Friday, announced Monday that it is filing for Chapter 11 bankruptcy. Also on Monday, Merrill Lynch announced it would be purchased by Bank of America for $50 billion or $29 a share.
On Sunday, the Fed stepped in with initiatives to provide support to the financial markets, including what it called in a release “enhancements to its existing liquidity facilities.” And a consortium of surviving investment banks, including Goldman Sachs, Morgan Stanley, Barclays and Citibank, took steps to enhance liquidity in capital markets including establishing a collatoralized borrowing facility totaling $70 billion. The stock market predictably took a big hit on the news, as the Dow was down 300 points at the open on Monday.
