Bank of America’s bold bid for Merrill Lynch came as the world’s top banks abandoned efforts to save Lehman and set out to build a firewall against further financial chaos with a $50bn liquidity pool to support other vulnerable institutions, reports the FT. There was speculation late Sunday that the Federal Reserve – which meets Monday to decide on interest rates on Monday – might announce additional liquidity support, possibly by easing the terms on its borrowing windows, to reduce the risk of a disorderly unwinding of Lehman’s positions. The moves capped a weekend of high drama that could lead to one of the most radical reshapings in Wall Street’s history. BofA’s rapid U-turn, which saw it abandon talks to buy Lehman and move to Merrill in the space of a few hours, will throw the spotlight on Morgan Stanley and Goldman Sachs, which report Q3 results this week. The two could soon become the only independent investment banks in the US. But, notes the WSJ,  “the prize will be bitter”.

This entry was posted by Gwen Robinson on Monday, September 15th, 2008 at 5:34 and is filed under Capital markets, M&A. Tagged with BofA, goldman sachs, Lehman Brothers, merrill lynch, morgan stanley. Edit this entry.