When Wall Street woke up Monday morning, two more of its storied firms had fallen. Lehman Brothers, burdened by billion in soured real-estate holdings, said it is filing for Chapter 11 bankruptcy after attempts to rescue the 158-year-old firm failed. Its businesses in Britain were already placed in administration, said the administrator, accounting firm PricewaterhouseCoopers, and employees carrying boxes and bags were walking out of Lehman's London offices.

Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a billion all-stock transaction.

The demise of the independent Wall Street institutions came as shock waves from the 14-month-old credit crisis roiled the U.S. financial system six months after the collapse of Bear Stearns. The world's largest insurance company, American International Group Inc., also was forced into a restructuring. And a global consortium of banks, working with government officials in New York, announced a billion pool of funds to lend to troubled financial companies.The aim, according to participants who spoke to The Associated Press, was to prevent a worldwide panic on stock and other financial exchanges.

Ten banks - Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS - each agreed to provide US billion "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."

The Federal Reserve also chipped in with more largesse in its emergency lending program for investment banks. The central bank announced late Sunday that it was broadening the types of collateral that financial institutions can use to obtain loans from the Fed.

Federal Reserve Chairman Ben Bernanke said the discussions had been aimed at identifying "potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses."

The European Central Bank, the Bank of England, and the Swiss central bank also made more short-term credit available to banks. European stocks fell sharply, with the FTSE 100 Index off 3.42 percent in London, the CAC-40 down 4.27 percent in Paris, and Germany's blue-chip DAX 30 falling 3.38 percent. Asian stock markets also tumbled, with India's Sensex sinking more than 5 percent. Japan and Hong Kong were closed for holidays.

Financial stocks were hard hit and the dollar fell against the pound and the euro.

Futures pegged to the Dow Jones industrial average fell more than 250 points in electronic trading Sunday evening, pointing to a sharply lower open for the blue chip index Monday morning. Asian stock markets also tumbled, with India's Sensex sinking more than 5 percent. Japan and Hong Kong were closed for holidays.

The stunning weekend developments took place as voters, who rank the economy as their top concern, prepare to elect a new president in seven weeks. It likely will spur a much greater focus by presidential candidates - Republican John McCain and Democrat Barack Obama - and members of Congress on the need for stricter financial regulation. Samuel Hayes, finance professor emeritus at Harvard Business School, said the Bush administration may get a lot of blame for the situation, which could benefit Obama.

"Just the psychological impact of this kind of failure is going to be significant," he said. "It will color people's feelings about their well-being and the integrity of the financial system."

Lehman Brothers' announcement that it is filing for bankruptcy came after all potential buyers walked away. Potential suitors were spooked by the U.S. Treasury's refusal to provide any takeover aid, as it had done six months ago when Bear Stearns faltered and earlier this month when it seized Fannie Mae and Freddie Mac.

Employees emerging from Lehman's headquarters near the heart of Times Square Sunday night carried boxes, tote bags and duffel bags, rolling suitcases, framed artwork and spare umbrellas. Many were emblazoned with the Lehman Brothers name. TV trucks lined Seventh Avenue opposite the building, while barricades at the building's main entrance attempted to keep workers and onlookers from gumming up the steady flow of pedestrians flowing in and out of Times Square. Some workers had moist eyes while a few others wept and shared hugs. Most who left the building quietly declined interviews. People snapped pictures with cameras and their phones. Observers pressed up against a police barricade drew the ire of one man who emerged from the building and shouted: "Are you enjoying watching this? You think this is funny?"

For more on this story, read here.(From AP, AOL Money)