The North American markets took another blow early Monday morning as two Wall Street giants and a a leader in the computer industry sank helplessly into deep, troubled waters.
Already slipping downwards with $60 billion in real estate holdings gone wrong, Lehman Brothers filed for Chapter 11 bankruptcy, the American equivalent of bankruptcy protection, following failed plans to help the 158-year-old company recover.
Meanwhile, Merrill Lynch & Co., on the brink of bankruptcy, was bought by Bank of America Corp. in a $50 billion all-stock transaction.
A U.S. Shareholder law firm says it will file a class-action lawsuit on behalf of Merrill Lynch investors over the buyout by Bank of America, against both parties.
AIG, the world's largest insurance company, was also forced into restructuring.
Finally, computer giant HP is cutting 24,600 jobs, or 7.5 per cent of its workforce, as the company absorbs EDS.
With the goal of preventing a worldwide financial meltdown, a group of world banks announced a $70-billion pool of funds to lend to the troubled financial companies.
The U.S. Federal Reserve also dipped into its pockets and chipped into the pool with money from its emergency lending program for investment banks. Federal Reserve chairman Ben Bernake says talks are being held to identify "potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses."
European markets have fallen sharply with the news from America.
Employees could be seen leaving Lehman's headquarters in New York, near the heart of Times Square, with boxes, tote bags and duffel bags, rolling suitcases, framed artwork and spare umbrellas - many with the Lehman Brothers name on them.
Some workers looked distraught as they left the building; a few were weeping and sharing hugs with former colleagues.
While analysts say the coupling of Bank of America with Merrill Lynch will create a financial powerhouse, they warn that many layoffs could arise from the deal.
Reports in The Wall Street Journal and The New York Times say AIG is seeking an additional $40 billion in emergency funds, possibly from the Federal Reserve, a week after a week when its stock dropped by 45 per cent.
"It's clear we're one step away from a financial meltdown," said Nouriel Roubini, chairman of the consulting firm RGE Monitor.
The independent broker-dealers "are going the way of the dodo bird," said Bert Ely, an Alexandria, Va.,-based banking consultant.
Many economists are predicting that the economy could slip into a full-on recession by the end of this year or early next year.
With files from The Associated Press
