Lehman Files for Chapter 11 Bankruptcy

Updated from Sunday, Sept. 14

Lehman Brothers (LEH Quote) filed for Chapter 11 bankruptcy protection Monday morning, according to several published reports.

The 158-year-old investment bank filed for Chapter 11 protection at 1:45 a.m. EDT in the Bankruptcy Court for the Southern District of New York, according to The Wall Street Journal. In a statement, Lehman said its board decided to file for Chapter 11 to "protect its assets and maximize value." Lehman said it plans to file certain motions so that it can continue to manage its operations.

None of the broker-dealer subsidiaries or other subsidiaries of Lehman will be included in the filing and all of the broker-dealers will continue to operate, the company said. Lehman customers, including those of its Neuberger Berman subsidiary may continue to trade or take other actions on their accounts.

Lehman's bankruptcy filing listed debts of $613 billion and named banks from Tokyo, Hong Kong, New York, Singapore, Taipei and elsewhere as unsecured creditors owed hundreds of millions of dollars, the Journal reported.

Lehman's fate appeared sealed after the top contenders to purchase it, including the U.K.'s Barclays (BCS Quote), walked away, saying they wouldn't support a deal that didn't include financial backing from the U.S. government or other banks, The New York Times reported Sunday on its Web site.

A group of banks will provide a financial backstop in order to help Lehman liquidate in an orderly fashion, and the Federal Reserve will accept lower-quality assets in return for loans, the Times reported.

The agreement by the banks and Fed to attempt to smooth the impact of a liquidation came out of a series of emergency meetings over the weekend at which government officials and top Wall Street executives tried to work out a rescue plan for Lehman. At the same time, employees of investment banks were scrambling to assess their own firms' exposure to Lehman and considering entering into credit default swap agreements with other banks that would effectively cancel out agreements they had with Lehman.