Thaindian News

Lehman Brother, US’s fourth largest investment bank, has filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court, while Bank of America struck an all-stock deal to buy Merrill Lynch for $29 a share, or $50 billion. The moves have shaken the world’s financial and capital markets across the board.

The U.S. government, which bailed out Fannie Mae and Freddie Mac a week ago and orchestrated the sale of Bear Stearns Cos. to J.P. Morgan Chase & Co. in March, played much tougher with Lehman. It refused to provide a financial backstop to potential buyers. Without such support, Barclays PLC and Bank of America, the two most interested buyers, walked away. Barclays said on Monday that it decided to pull out of the potential deal after deciding it wasn’t in the best interest of shareholders.

Early yesterday, Lehman filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. Lehman said none of the broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate. Customers of Lehman Brothers, including customers of its wholly owned subsidiary, Neuberger Berman Holdings LLC, may continue to trade or take other actions with respect to their accounts, Lehman said.

On Sunday night, Bank of America struck an all-stock deal to buy Merrill Lynch for $29 a share, or $50 billion.

Though the US Federal Reserve steered clear of a bailout, it is expected to take new steps to stabilize the US broader financial system. These steps, expected to be temporary, would make it easier for banks and securities firms to borrow from the central bank by using a wider range of collateral.

Source : National News Bureau, Public Relations Department of Thailand