Lehman's fall and China's markets

Lehman Brothers Holdings Inc.'s (NYSE:LEH) announcement early Monday of plans to file for Chapter 11 bankruptcy capped off a roller-coaster weekend on Wall Street that saw already shaken U.S. markets rattle further due to woes at other major financial firms and the federal government takeover of beleaguered mortgage financiers Fannie Mae and Freddie Mac.

Strangled by the subprime crisis and plunging real-estate values, the storied investment banking titan collapsed under the weight of $60 billion in bad debts on its property holdings. The fall of the venerable 158-year-old Wall Street institution marks the beginning of the largest corporate bankruptcy case in U.S. history, based on total assets before the filing ($639 billion as of May 31).

Much like the Enron bankruptcy in 2001, Lehman Brother's crash-and-burn not only permanently reshapes the American financial landscape, it is already causing a ripple effect that is sending shudders through global markets. In wake of the news, the Dow Jones Industrial Average tumbled over 500 points, Chinese share prices closed sharply lower, Hong Kong stocks nosedived to their lowest level since Oct. 27, 2006, and the Shanghai composite dipped below its psychologically important 2,000 level — amid fears that the bankruptcy would stoke further troubles in the United States financial sector.

Asian governments closed the doors of Lehman’s operations from Tokyo to Seoul in an effort to reassure investors that effects on regional companies with exposure to the bank would be limited. The Bank of Japan pumped 2.5 trillion yen, or $24 billion, into Japanese money markets, Taiwan's central bank infused the foreign-currency interbank market with $3.59 billion, and the chief of the Hong Kong Monetary Authority told the local media of plans to make a similar move to help give the . . .

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