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Credit Fears Send Lehman Tumbling

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The Associated Press

Published: July 11, 2008

NEW YORK - Lehman Bros. Holdings Inc. shares slid Thursday as continued credit fears shook Wall Street, and government officials again reiterated that no bank is too big to fail.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before the House Financial Services Committee, saying that the government's overhaul of regulators will help increase oversight.

However, they both said that doesn't mean financial institutions are too big to fail.

"We aim not only to make the financial system better able to withstand future shocks but also to mitigate moral hazard and the problem of too big to fail by reducing the range of circumstances in which systemic stability concerns might prompt government intervention," Bernanke said in a prepared speech.

Lehman Bros., the nation's fourth-largest investment bank, is seen by many analysts to be the weakest of Wall Street's biggest firms. Concerns emerged about Lehman's liquidity and leverage last month after the investment bank reported an unexpected $3 billion loss for the second quarter.

The investment bank was also hurt by rumors that some of its biggest trading partners were scaling back their business. Several firms quickly denied the talk, with bond fund Pacific Investment Management Co. and hedge fund SAC Capital Advisors LLC issuing statements that they continue to do business with Lehman.

A spokeswoman for Lehman Bros. did not immediately return calls seeking comment.

There has also been comfort that Lehman chief executive Richard Fuld would be able to avoid a fire sale or outright collapse considering he is a director of the Federal Reserve Bank of New York.

Lehman stock closed down $2.44, to $17.30. It declined by more than 19 percent earlier in the session.

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