Via Calculated Risk, Lehman bankruptcy expected before midnight tonight, after Bank of America pulls out of its rescue:
Bank of America Corp. abandoned talks to buy Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, less than three hours after Barclays Plc said it wouldn't buy the faltering investment bank.
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The U.S. government is racing to find a solution for Lehman before markets open tomorrow, two people familiar with the situation said. Barclays walked away because it couldn't get guarantees from the government or agree on a private-sector deal to mitigate what it called Lehman's "open-ended" trading obligations.
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Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.
Who said mortgage-backed securities weren't safe?
Update, 18:00 CDT: Yep.
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