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Lehman Brothers Too Big To Fail? Don't Count On It

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Wall Street is in a full meltdown. Bear Stearns (BSC) is gone, so the markets are wondering who's next. The leading contender? Lehman Brothers (LEH).

Lehman's stock dropped 15% on Friday, and it's down by another third in pre-market trading. Some specific concerns:

* Like Bear Stearns, Lehman is relatively small and undiversified.

* Like Bear Stearns, Lehman just reiterated that its "liquidity position is strong."

* Like Bear Stearns, at least one of Lehman's trading partners is cutting it off: The WSJ reports that Southeast Asia's biggest bank, DBS Holdings, has asked traders not to enter new transactions with Lehman Brothers. "DBS has sent an internal e-mail saying it would not deal with Lehman Brothers from now on." [Update: DBS has since re-authorized some Lehman trades]

* Like Bear Stearns, Lehman gambles about $30 for every $1 it has.

* Like Bear Stearns, Lehman chose not to raise additional capital last fall.

* Like Bear Stearns, no one has any idea what's really on Lehman's balance sheet (including, probably, Lehman)

* Unlike Bear Stearns, says an analyst at ING, Lehman is NOT too big to fail, which means that the Fed might not be in such a panic to bail it out.

If Lehman is hellbent on following the Bear Stearns playbook, it will now trot Dick Fuld out onto CNBC to say that the bank is in great shape. And then, a day or two later, it will go bankrupt.

More on the Wall Street Meltdown:
$2 Bear Stearns Sale Reveals The True Value of All Stocks
Bear Stearns Debacle: Shareholders Getting What They Deserve