The financial markets kick off another week of volatile trading as two of Wall Street’s most storied firms vanish overnight. Lehman Brothers, an investment bank founded in 1850, files for Chapter 11 bankruptcy after meetings at the New York Fed failed to find a suitor for the Wall Street firm. Officials from the Treasury Department, Securities and Exchange Commission, and the New York Fed were present as well as top executives from Morgan Stanley, Citigroup, JP Morgan Chase, Goldman Sachs, and Merrill Lynch. British bank Barclays PLC has walked away from a possible deal and Bank of America, another candidate to acquire distressed Lehman Brothers, decided that Merrill Lynch would be a better acquisition instead of Lehman, who holds nearly $60 billion in depreciating real estate holdings. Potential buyers were frightened to pursue a deal after the US Treasury refused to provide any guaranteed aid as it had done in the past with Bear Sterns and when it seized Fannie Mae and Freddie Mac. Merrill Lynch, an investment bank and brokerage firm, ends a legacy that started out in 1914. They have agreed to be acquired for $29 dollars a share, or $50 billion dollars, which is a 70% premium to Friday’s closing price.

Now that the weak are being consumed by the stronger, more financially stable companies, who is next on the chopping block? The US Treasury and Fed are becoming more reluctant to bail out firms, credit and financing becomes increasingly harder to obtain, and as the decline of home prices continue to freefall, no institution is out of the water just yet. According to an AP story, former Federal Reserve Chairman, Alan Greenspan, said during an interview recently:

“Let’s recognize that this is a once-in- a-half-century, probably once-in-a-century type of event” — the worst “by far” in his career, Greenspan said. “There’s no question that this is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go. And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes. That will induce a series of events around the globe which will stabilize the system,” he added.

As stock prices drop, it becomes harder for troubled companies to raise the capital needed to stay afloat. This leaves companies such as: Washington Mutual, the nation’s biggest savings bank, American International Group, the world’s largest insurer, Wachovia, and Citigroup in a pickle as it will try to raise capital and sell off its assets and/or mortgage-backed exposures in a last ditch effort to stay afloat or ultimately be liquidated like Lehman Brothers or be acquired like Merrill Lynch. Lehman Brothers was the 4th largest investment bank and is the largest failure of an investment bank in 18 years.