FTSE 100 falls as Lehman fears grow

Wednesday 10th September 2008

Wall Street investment bank Lehman Brothers saws its share price tumble 44.95 per cent yesterday as fears grew over its capital position.

Fears grew that Lehman Brothers would not be able to raise capital to cover its losses tied into the credit crunch.

Speculation was rife that a deal with the Korea Development Bank had fallen through which would have seen the Korean state-owned body taking a stake in the bank.

A statement from Lehman Brothers is expected at 12:30 BST stating "key strategic initiatives".

Fellow investment banks- including Goldman Sachs – have issued statements they are continuing to trade with Lehmans.

Meanwhile, the Financial Times reports the Royal Bank of Canada was considering buying Lehman Brothers in the summer, but walked away on doubts about the investment bank's ability to tidy its balance sheet.

The speculation brought to a quick end the rally sparked by the US government rescue of mortgage backers Freddie Mac and Fannie Mae.

The Dow Jones fell 2.34 per cent at closing to 11,230.73.

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