My opinion about the rumor "Major Investment Bank go bankruptcy"
It is said by Thomason Financial and Dealbreak.com that a major investment bank is filing Chapter 11 bankruptcy protection. It may not bee completely true, since this kind or filing cannot be hidden by anyone, even by regulators themselves. However, it is possible that a major investment bank is in grave troubl, on the edge of bankruptcy protection, or is seriously considering filing bankruptcy.
The question is who the mysterious investment bank is? The most wanted one is Bear Stearns, however, its problems are mainly in hedge funds, not its proprietary trading desks. Furthermore, CITIC Bank from China is about to by a big stake in Bear, which can support it through this crisis. I personally believe that Bear is not on the edge of bankruptcy.
Another candidate is HSBC, since it has a lot of MBS in house. However, HSBC is too big and it is bidding for a Korean bank. How can it bid for Korean Exchange Bank if it is filing bankruptcy? That is why I do not believe it is HSBC.
The most dangerous candidate is perhaps Lehman Brothers. Lehman has the strongest Mortgage-related prop trading desk of the world, and we do not yet know the details about its prop trading loss. It has closed its whole subprime related business, which could be a sign. I think Lehman is the bank in rumor.
However, some European players like DB, Barcap or BNP are also potential candidates, but none of them has a strong enough mortgage prop trading business. The next week is maybe the toughest for Lehman, and I hope it could survive.