Bank of America on Sunday announced the takeover of Merrill Lynch for $50bn, just hours after abandoning talks with Lehman. Lehman Brothers said it would file for bankruptcy protection.

 

Barclays and BofA pulled out of talks with Lehman on Sunday afternoon after the US government refused to provide a guarantee to enable Lehman to continue trading until a deal had been completed. Just hours later the takeover of Merrill was finalized.

Merrillâ??s board voted on Sunday night to approve BofAâ??s takeover all-stock bid at $29 a share. That is a premium of 70 per cent on Fridayâ??s closing price of $17.05. Merrillâ??s shares have fallen nearly 70 per cent this year.

Meanwhile the FED suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries and said it was making it easier for financial institutions to access Fed liquidity by easing terms on its borrowing facilities and accepting a much wider range of assets as collateral.