The Mother of All Mondays

If Lehman can’t find a life raft, it could lead to turmoil in the credit markets as traders rework credit-default swaps and other trades with Lehman at their center. Credit-default swaps traders were called to work Sunday, the Wall Street Journal reported, for a special trading session that would let Lehman counterparties offset their positions against each other. Equity markets could also be roiled Monday. The crumbling of a major Wall Street institution is likely to shake badly the confidence of investors who had hoped the Street would make it through the credit crisis without yet another large firm being swallowed up. What’s more, the economic backdrop looks dimmer than it did in March when Bear Stearns was pushed into the arms of Jamie Dimon.

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