Markets meltdown as Lehman collapses, Merrill taken over

New York, Sep 15 (PTI) Global financial markets sank
sharply today as traders worried over more troubles at the
Wall Street following a failed plan to rescue Lehman Brothers,
and Bank of America's takeover of Merrill Lynch.

Lehman Brothers, burdened by 60 billion dollars in
soured real-estate holdings, said it is filing for chapter 11
bankruptcy after attempts to rescue the 158-year-old firm
failed.

The giant of financial markets was shaken up by losses of
hundreds of billions of dollars in bad mortgages in the
housing markets.

The stunning weekend developments came as Lehman Brothers
began considering bankruptcy after Barclays and Bank of
America, the top suitors, walked away apparently following
Federal authorities declining to provide financial backup to
them, declaring bankruptcy would allow Lehman's subsidiaries
to continue to function as the company itself is wound down.

Its businesses in Britain were already placed in
administration, said the administrator, accounting firm
PricewaterhouseCoopers, as employees carrying boxes and bags
were walking out of Lehman's London offices, AP reports said.

Bank of America said it is buying Merrill Lynch & Co Inc
in a 50 billion dollar all-stock transaction.

Merrill Lynch, another investment bank laid low by the
crisis that was triggered by rising mortgage defaults and
plunging home values in the United States, agreed to be
acquired by Bank of America for 0.8595 shares of Bank of
America common stock for each Merrill Lynch common share.

That values Merrill at 29 dollars a share, a 70 percent
premium over the brokerage's Friday closing price of
17.05 dollars, but well below what Merrill was worth at its
peak in early 2007, when its shares traded above 98 dollars.

North Carolina-based Bank of America has the most
deposits of any US bank, while Merrill Lynch is the world's
largest brokerage. A combination of the two would create a
global financial giant to rival Citigroup Inc, the biggest
U.S. bank in terms of assets.

The demise of the independent Wall Street institutions
came as shock waves from the 14-month-old credit crisis
engulfed the US financial system six months after the collapse
of Bear Stearns.

The world's largest insurance company, American
International Group Inc, also was forced into a restructuring.

And a global consortium of banks, working with government
officials in New York, announced a 70 billion dollar pool of
funds to lend to troubled financial companies.

Merrill has some 60,000 employees and Lehman 25,000. It
was not clear how the moves would affect them.

AIG executives were reported to be trying to raise funds
by selling assets or infusion of capital from private equity
firms.

As the crisis intensified, Mayor Michael Bloomberg,
himself a billionaire, cancelled his visit to California to
meet governor Arnold Schwarzenegger and instead was talking to
officials and experts to determine the impact of the
developments on the city.

Ten banks -- Bank of America, Barclays, Citibank, Credit
Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill
Lynch, Morgan Stanley and UBS -- each agreed to provide 7
billion dollars "to help enhance liquidity and mitigate the
unprecedented volatility and other challenges affecting global
equity and debt markets." PTI TEAM SUA