U.S. stock markets down on Lehman, Merill fate

New York, Sep 16 (PTI) The stock market here suffered the
worst one-day loss in seven years as investors, fearing
collapse or consolidation of more banks, went on a selling
spree late in the session on Monday.

The blue chip Dow Jones industrial average suffered worst
loss since Sept 11, 2001 terrorist attacks and plummeted more
than 500 points.

Financial markets across the world were rattled by the
sale of Merrill Lynch on Sunday and Lehman Brothers Holding
declaring bankruptcy on Monday and subsequent decision taken
by the government against bailing out the failing financial
institutions.

Adding to the turmoil was insurance giant American
International Group (A.I.G.) trying to arrange bridge loan of
40 billion dollar to tide over the difficult period and
approaching the Federal government and the New York State.

Lehman spent Monday trying to sell its assets before most
of its customers walk out on it and was said to be in
negotiations with Barclays PLC of Britain. The Wall Street
Journal reported quoting people involved in the discussions as
saying they are increasingly hopeful a deal would be struck.

Even as the United States treasury officials sought to
reassure the markets, analysts said they expect at least some
other banks to try to consolidate.

Dow Jones remained in the negative category throughout
the day and closed 504.48 points or 4.42 percent down to
10917.51. The technology-heavy Nasdaq Composite index lost
81.36 points or 3.60 percent to close at 2,179.91, S&P 500
index, however, fared worst losing 4.7 percent.

Bank of America, which agreed to buy Merrill Lynch, saw
its shares drop 21.3 percent to 26.55 dollar. The Journal
quoted an analyst saying that investors have concern that "it
might have bitten more than it could chew". However, Merrill
Lynch's shares rose by 0.1 percent.

Shares of Goldman Sachs and Morgan Stanley also dropped,
with analysts saying that investors had concerns as they have
similar models as the failed Lehman.

At a briefing in Washington, Treasury Secretary Henry M
Paulson Jr agreed that the financial markets were going
through tough times but expressed confidence about the
soundness and resilience of the system.

He said he was committed to working with regulators and
policy makers in the Congress to take additional steps.

On Wall Street, Lehman's share fell 95 percent to just
over 21 cents. Meanwhile, employees of the two failed banks
were seen clearing their desks and even saying good byes.

New York Mayor Michael Bloomberg said he did not expect
much effect on the city's budget saying that he had taken into
consideration this possibility. But New York State Governor
David A Peterson was more worried.

He said the State would allow A.I.G. to borrow 20 billion
dollar from its subsidiaries.