Lehman Bros files for Chapter 11 bankruptcy

Lehman said that no broker-dealer subsidiaries will be included in bankruptcy filing. It added that it is exploring sale of its broker-dealer operations. It further said that it is in advanced talks with potential buyers for investment management division.

Lehman added that the customers of the company may continue to trade/take action with respect to their accounts.

Officials at the Federal Reserve and US Treasury are taking steps to mitigate risk to the system and assure the orderly functioning of the US markets when they open on Monday. The Federal Reserve has also agreed to accept lower-quality assets in return for loans from the government.

Additionally, ten Wall Street banks have agreed to set up a collateralized borrowing facility, and committed to fund for USD 7 billion each. The banks are Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley, and UBS. These banks have said they are committed to fund USD 7 billion each for a USD 70 billion collateralized borrowing facility.

The banks add that they are working together to assist in maximizing market liquidity through ongoing trading relationships, dealer credit terms, and capital committed to markets. This will also facilitate the orderly resolution of OTC derivatives exposures between Lehman Brothers and its counterparties.

All 10 banks say they intend to use the expanded Federal Reserve primary dealers credit facility this week. The banks say their actions reflect "extraordinary market environment".