[Cid_Yama]

The U.S. dollar slid against the yen and euro in Asian trade on Monday as talks to rescue Lehman Brothers Holdings (LEH.N: Quote, Profile, Research, Stock Buzz) faltered, fuelling concerns over the stability of the U.S. financial system and sparking talk of a possible rate cut there.

Bill Gross, head of bond fund Pimco, told Reuters that if Lehman filed for bankruptcy, it could set off a wave of position unwinding around the globe.

"It appears that Lehman will file for bankruptcy and the risk of an immediate tsunami is related to the unwind of derivative and swap-related positions worldwide in the dealer, hedge-fund and buyside universe," Gross said.

link

[ReverseEngineer]

The floor of the NYSE on Monday can only be described with one word: PANIC
Reverse Engineer

[Maddog78]

For sure.
It is going to be a crazy day in the markets around the world.

[Cashmere]

No sh-t. I'm going to go get a coffee, because I'm staying up all night.

The last time markets tanked in asia (MLK day), the Fed announced a huge rate cut pre-market on Tuesday to staunch the bleeding before it got started.

This time? I'm curious.

[BigTex]

SKF (double short financials) ought to have a good day tomorrow.

I hope that the oil service companies sell off, because I want to buy some more.

When the dust settles from this financial mess, peak oil is still going to be sitting there looking at us like a junkyard dog.

This strong dollar business the last few weeks has been ridiculous.

[Cid_Yama]

Cash, You and me both. I'm about to go take a nap for a couple hours.

Who knows when the fireworks will finally end. I've already cancelled all plans for tomorrow.

[nobodypanic]

it seems to me that if the dollar drops tomorrow, then oil and oil services should go up.

is that right?

[KCFrog]

SKF (double short financials) This strong dollar business the last few weeks has been ridiculous.

But Larry Kudlow said "King Dollar" had returned?

[Heineken]

A "deal" will be worked out before the markets open, and stocks will soar in full celebratory mode.

That's what's been happening all along. Why should it be different with Lehman?

[Maddog78]

A story from a few hrs. ago:

Banks seen offering plan to restore confidence Sunday 14 Sep 8:59 pm ET By Joe Bel Bruno and Marty Crutsinger, AP Business Writers
Lehman's future in doubt, banks seen unveiling plan to restore confidence in financial system
NEW YORK (AP) -- As the outlook for Lehman Brothers dimmed Sunday, U.S. and foreign banks were pressed to create a plan aimed at inoculating the global financial system against the investment bank's failure, a top investment banking official said.
Banks were in tense talks to create a pool of money worth up to $100 billion to lend troubled financial companies, the official said on condition of anonymity because the discussions were ongoing. And officials at the U.S. Treasury and the Federal Reserve were expected to announce they are prepared to be more generous in the Fed's emergency lending program for commercial and investment banks.

The plan comes as top government officials and Wall Street executives held marathon, but so far fruitless, meetings to save Lehman Brothers, and amid signs that the 158-year-old investment bank might be forced to seek bankruptcy protection and liquidate. The company's shares have plunged 95 percent in the past year over worries that it does not have enough money to cover losses from its massive real estate holdings.

The official also said the Treasury Department and the Fed were pushing Bank of America Corp. to buy Merrill Lynch & Co. On Friday, Merrill Lynch's shares fell as investors fretted it might be the next investment bank to come under pressure from its portfolio of risky mortgage-backed securities.

Expectations that the 158-year-old Lehman would survive dimmed Sunday afternoon after Barclays PLC withdrew its bid to buy the investment bank. Barclays and Bank of America were considered front-runners to buy Lehman, which is foundering under the weight of $60 billion in soured real estate holdings.

The Lehman talks originally were aimed at selling the investment bank in whole or in part. The deal was tripping on the potential buyers' insistence that they receive the same kind of help that Bear Stearns Cos. got last March when JPMorgan Chase & Co. bought the securities firm with a $29 billion Fed-backed loan.

Treasury Secretary Henry Paulson has said the government will not help close a Lehman deal, and it was clear late Sunday he was not budging. Lehman declined to comment on the talks.

If no deal were reached, it raised the specter of a bankruptcy and liquidation of the investment bank, which in turn could have a tumultuous effect on world markets. Late Sunday, Dow Jones industrial average futures were down 276 points, or 2.4 percent, at 11,182.

Traders and bankers across Wall Street came into the office Sunday to prepare their departments for what is expected to be a brutal day in the market. JPMorgan employees who work trading desks were asked to come in at 7 a.m. EDT, way before the market's 9:30 a.m. open.

An employee at Lehman Brothers, who spoke on condition of anonymity, said employees were briefed of the situation earlier Sunday afternoon via conference call. Lehman executives did not explicitly say the company was filing for bankruptcy protection, but essentially confirmed the bank was planning to liquidate its assets.

There were other signs that Lehman was moving closer to a bankruptcy filing, with several reports that it has hired Weil, Gotshal & Manges, the law firm that handled the collapse of investment firm Drexel Burnham Lambert in 1990.

Moreover, there was also an emergency trading session held at the International Swaps and Derivatives Association to "reduce risk associated with a potential Lehman Brothers Holdings Inc. bankruptcy." The ISDA, which arranges trades for derivatives, said it was allowing customers to make trades and unwind positions linked to Lehman -- but that those trades would be voided if no filing occurred before midnight.

Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox were among those taking part in the Lehman meetings. Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance.

Paulson's tough bargaining stance received support from outside observers Sunday, who argued that the government had no choice but to draw a line in the sand.

"If Treasury put money into the Lehman deal, then going forward no deal would get done without Treasury help," said Mark Zandi, chief economist at Moody's Economy.com. "Every potential buyer would wait until Treasury stepped in and that would mean Treasury would be on the hook for a lot more bailouts."

The current situation is different from Bear Stearns' situation six months ago. In Lehman's case, financial markets have been aware of the company's problems for a much longer period and have had time to prepare. Investment banks also now have the ability to obtain emergency loans directly from the Fed, a crucial support that they did not have back in March when Bear Stearns was rescued.

Bankers and government officials were also trying to tackle a broader agenda that includes problems at American International Group Inc. and Washington Mutual Inc., said the investment bank officials, who were briefed on the talks.

AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. There were reports that AIG plans to disclose a restructuring by early Monday that's likely to include the disposal of major assets including its aircraft-leasing business and other holdings.

Lehman put itself on the block earlier last week. Bad bets on real-estate holdings -- which have factored into bank failures and caused other financial companies to founder -- have thrust the firm in peril. It has been dogged by growing doubts about whether other financial institutions would continue to do business with it.

Richard S. Fuld, Lehman's longtime CEO, pitched a plan to shareholders Wednesday that would spin off Lehman's soured real estate holdings into a separately traded company. He would then raise cash by selling a majority stake in the company's unit that manages money for people and institutions. That division includes asset manager Neuberger Berman.
AP Business Writers Stephen Bernard in New York and Raphael Satter in London contributed to this story.

A story from Oct. 29, 1929.

Gigantic Bank Pool Pledged To Avert Disaster as Second Big Crash Stuns Wall Street
Quote: Largest Financial Powers in the City Meet After Day of Hysterical Liquidation Sinking Prices Below Thursday's By Laurence Stern

After the stock market had come crashing down again in a veritable deluge of forced and hysterical liquidation, word sped through the financial district last evening that the largest banks in the city were prepared to exert their organized power this morning to prevent further disaster.

Arrangements described as "fully adequate" were completed at a conference at the offices of J. P. Morgan & Co. at Broad and Wall Streets...

Although no formal statement was issued, it was the consensus of those at the meeting that the worst of the liquidation is over and that a natural demand for investment stocks now available on the bargain counter should go far toward an immediate restoration of trading stability.

Hmmmm, notice any similarities?

[jerry_mcmanus]

FWIW, gold is already up USD$20 as of 6pm Sunday Pacific time, and the market only just opened. Should be an interesting day Monday. Here in Seattle all eyes are on WAMU, with many observers predicting it's next in line for nationalization, er, I mean bailout.

I'm reminded of last summer when the subprimes first exploded, some of the more pessimistic commentators predicted it was jsut a matter of time before "bodies started floating to the surface". Yep.
Cheers,
Jerry

[TheDude]

Your typical Lehman employee in 24 hours - this is more than a bit violent, btw!: Violent! Funny, but really violent!

As an economic layman I find the idea of a $455 trillion derivatives market to be more than a bit wrong. If future chapters of the Bible are written I'd bet on this being described as an abomination unto God.

[Denny]

For sure. It is going to be a crazy day in the markets around the world.

Well, its now close to noon in Australia, and their market index is down abut 1.7%. Not exactly a run on the market. Mind you, Australia's markets are very strong on hard commodities.

[idiom]

So, should I call all my friends over for an all night (Us markets wake up late here in NZ) Crash Party or not?

I don't want to throw a kegger unless absolute panic is garunteed.

[AlexdeLarge]

Banks and Markets in Asia are closed for Holiday. There will be alot of behind the door talks to get the other central banks and sovereign funds to step in Tuesday. I suspect it won't work until later in the week.

My WAG :
Dow down 600+ tomorrow. Dow down another 300 Tuesday as Asian traders gets flustered and sell.

Wednesday???? A new "temporary" bottom of 10000. Maybe even a slight bump up as the other central banks get scared and put a floor under all the markets. It's in everyone's interest to stop the run. Then we see a another slow decline until DOW 8000 by February 09.

But if AIG or WAMU tank..............were farked. We will see real panic on Wallstreet.

Its' real now gang....and it ain't over. You best pray those who in a position to do something get it right and stabilize the market. Otherwise, you best get ready to grow your own food!! This sucks!!

[Snowrunner]

Its' real now gang..and it ain't over. You best pray those who in a position to do something get it right and stabilize the market. Otherwise, you best get ready to grow your own food!!

And what do you think they can do? There is only so much propping up you can do to a corpse, sooner or later it'll start stinking either way.

This sucks!!

Oh yes.

[AlexdeLarge]

Its' real now gang..and it ain't over. You best pray those who in a position to do something get it right and stabilize the market. Otherwise, you best get ready to grow your own food!!

And what do you think they can do? There is only so much propping up you can do to a corpse, sooner or later it'll start stinking either way.

This sucks!!

Oh yes.

Appeal to the other central banks, sovereign funds to step in and bail out WAMU and AIG. Its in their interest that the system does not collapse. If the US system goes down.....so will the rest of the world.

[emeraldg40]

So what happens to somebody that has an AIG claim going?

[RonMN]

Dave Faber on CNBC just said that THE BIG THING to watch for tomorrow morning is if AIG gets down graded by the rating agencies...he said if that happens, things will get ugly fast.

[Snowrunner]

Appeal to the other central banks, sovereign funds to step in and bail out WAMU and AIG. Its in their interest that the system does not collapse. If the US system goes down.....so will the rest of the world.

If they believe that it won't fix the situation and just delay the inevitable they may just let it fall and safe whatever they can for themselves. But I guess time will tell.