Wall Street Turmoil: First, Bankruptcy for Lehman Brothers

Lehman Brothers, the fourth-largest US investment bank, has filed for bankruptcy protection, dealing a blow to the fragile global financial system.   
   
The news led to sharp falls in share prices around the world, and officials took measures to reassure markets.   
   
Lehman had incurred losses of billions of dollars in the US mortgage market.   
   
Merrill Lynch, also stung by the credit crunch, has agreed to be taken over by Bank of America, the latest twist in a dramatic turn of events on Wall Street.   
   
Lehman's demise is being felt around the world:   
   
- Stock markets and the US dollar have tumbled in reaction to Lehman's collapse, with banking shares hardest hit. UK bank HBOS saw its shares plummet 30%.   
- Central banks have moved to reassure markets. The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of about $50b into the financial system.   
- There are fears AIG, once the world's largest insurer, could also face collapse. It is taking steps to raise money amid reports it is seeking a $40b emergency loan from the Fed.   
- Bank of America's move to buy Merrill in a $50bn deal means that three of the top five US investment banks have fallen prey to the subprime crisis within six months.   
- In the UK, accountants PricewaterhouseCoopers have been appointed as administrators for Lehman.   
   
Stock markets in Europe and Asia dropped sharply and the dollar tumbled against the yen, the euro and the Swiss franc as Lehman's failure raised fears about the strength of the global financial system.   
   
US shares on Wall Street also fell. Shortly after trading began the Dow Jones index was down 304 points, or 2.7%, at 11,118.    
   
US Treasury Secretary Henry Paulson said he would work with regulators and policymakers around the world to maintain the stability of financial markets.   
   
"I am confident in the resilience of our capital markets, and in the commitment of US regulators and market participants to work together through this difficult period," Paulson said.