Lehman Brothers heads for Chapter 11 as Barclays walks away

Investment banking firm Lehman Brothers, one of largest in the world, has said that it is going to file for bankruptcy.

Asian markets tumbled on the news of one of the worst banking collapses in recent history. European and American markets are expected to do the same as soon as they open for trading in a few hours from now.

Lehman Brothers is tethering on the verge of collapse after a weekend full of negotiations failed to find a buyer for the firm. Discussions were led by US treasury secretary Henry Paulson, but British bank Barclays decided to walk away from the deal, citing shareholder interest.

The list of potential buyers for Lehman also included Bank of America, who preferred to acquire Merrill Lynch instead, in the absence of financial backing from Federal authorities.

Global markets in turmoil
Global markets are in turmoil following the two events in United States, the acquisition of brokerage firm Merrill Lynch by Bank of America, and Lehman Brothers' move to file for Chapter 11 bankruptcy protection. By declaring bankruptcy, Lehman's subsidiaries can still continue to function, even as the company is wound down.

A consortium of 10 banks, including Citigroup, the Credit Suisse Group, and Barclays have agreed to create a $70 billion borrowing facility that could be used to tide over the financial crisis. Each member of the consortium would invest $7 billion. The other banks are Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, and UBS.

There hav also been reports of insurance firm AIG being in trouble, and urgently needing a capital infusion to survive beyond a few days.

The preferred suitor for Lehman Brothers, Barclays bank of the UK, withdrew its bid for the investment bank, saying that while Lehman was ''attractive'', it did not match up to Barclay's stringent standards.