The Biggest Financial Story of the Past 50 Years

-After failing to finagle a government bailout, Lehman Brothers (NYSE: LEH) filed for bankruptcy.
-Bank of America (NYSE: BAC) spurned Lehman Brothers and instead agreed to acquire Merrill Lynch (NYSE: MER).
-Insurer AIG (NYSE: AIG) begged the Fed for as much as $40 billion of assistance.

This is bigger than either JPMorgan Chase's (NYSE: JPM) buyout of Bear Stearns or the government bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Our colleague Bill Mann, in fact, has deemed this weekend's credit-crunch-inspired string of bailouts, buyouts, and bankruptcies "the biggest financial story of the past half century."
Bigger than the dot-com bust? Yep. Bigger than Black Monday in 1987? Yep. Bigger than the oil shock of the 1970s? Mmmhmm.
NYU economics professor Nouriel Roubini, George Soros, and the International Monetary Fund have all called the overall credit crisis the worst since the Great Depression.

U.S. to Take Over AIG in $85 Billion Bailout

The U.S. government seized control of American International Group Inc. -- one of the world's biggest insurers -- in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.
The step marks a dramatic turnabout for the federal government, which had been strongly resisting overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy. Just last weekend, the government essentially pulled the plug on Lehman Brothers Holdings Inc., allowing the big investment bank to go under instead of giving it financial support. This time, the government decided AIG truly was too big to fail.

Fed Refuses To Bail Out Markets With A Rate Cut

Despite market turmoil, a plunging stock market, the predictions of many investors and vocal calls for interest rate cuts from traders, the Federal Open Market Committee left its interest rate target at 2 percent this afternoon.
My favorite take on this was from MarketWatch. "Just as it had over the weekend to Lehman Bros. and AIG, the Fed said, 'No, you are on your own,'" MarketWatch said.

Goldman, J.P. Morgan Are Asked To Lead $75 Billion AIG Loan Effort

In an effort to prop up giant insurer American International Group Inc., the Federal Reserve on Monday asked Goldman Sachs Group Inc. and J.P. Morgan Chase to help make $70-$75 billion in loans available to the company, according to people familiar with the situation.
The move came as officials on both the state and federal level scrambled Monday to help AIG find ways to come up with as much as $40 billion to help prevent a downgrade of its credit rating, an outcome that could ultimately prove fatal for the firm. It wasn't immediately clear whether the banks would agree to the government's request.

Lehman Files for Bankruptcy

Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.
The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, has filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan today. The collapse of Lehman, which listed more than $613 billion of debt, surpasses WorldCom Inc.'s insolvency in 2002 and Drexel Burnham Lambert's failure in 1990.
Lehman was forced into bankruptcy after two suitors, Barclays Plc and Bank of America Corp., abandoned takeover talks yesterday and the company lost 94 percent of its market value this year. Chief Executive Officer Richard Fuld, who started working for the New York-based firm in 1969 and turned it into the biggest underwriter of mortgage-backed securities at the top of the U.S. real estate market, joins his counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn't survive this year's credit crunch.

Bank of America to Buy Merrill for $50 Billion as Crisis Widens

Bank of America Corp., the biggest U.S. consumer bank, agreed to acquire Merrill Lynch & Co. for about $50 billion as the credit crisis claimed another of America's oldest financial companies.
Bank of America will pay $29 a share for New York-based Merrill in stock, 70 percent more than the Sept. 12 closing price, the company said in a statement today. Merrill, battered by $52.2 billion in losses and writedowns from subprime-mortgage- contaminated securities, has plunged more than 80 percent from its peak of $97.53 at the start of last year.
The takeover ends 94 years of independence for Merrill and gives Charlotte, North Carolina-based Bank of America a sales force with 16,690 brokers who manage $1.6 trillion for customers. Merrill, led by Chief Executive Officer John Thain, was in danger of becoming the next subprime casualty after Lehman Brothers Holdings Inc. filed for bankruptcy court protection earlier today.

No Government Funding For Lehman

The Treasury Department is adamantly against any plan to rescue Lehman Brothers that would put taxpayer money at risk, according to a person familiar with the matter.

Negotiations over the fate of Lehman are underway right now, with officials from the Treasury Department and the Federal Reserve playing a pivotal role. But the government's assistance is mainly confined to offering waivers of certain banking regulations rather than any direct financial role, the person said.