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The fourth biggest investment bank in the world, Lehman Brothers, has announced it is filing for bankruptcy after an eleventh-hour bid to bail it out failed.
Going down: Lehman Brothers is filing for bankruptcy
The 158-year-old Wall Street bank admitted defeat after a weekend of tense negotiations came to nothing and caused turmoil in the global markets.
It came as the firm's rival Merrill Lynch agreed a $50bn takeover deal with the Bank of America, effectively meaning two of the biggest banks in the world no longer exist.
The London Stock Exchange opened down 2.5% this morning and had dropped by almost 150 points within the first few minutes of trading.
Asian markets had already fallen after talks in the US to save Lehman Brothers floundered and it was clear the Treasury would not rush in to rescue it.
Many of the company's 4,000 workers based in London now face the axe and the crisis could spark a cull of tens of thousands of other jobs across the financial sector.
Its demise could also seriously dent pensions, increase the credit crunch squeeze on mortgages and derail the Government's attempts to relaunch the economy.
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