Japanese bank steps in to save 2,500 jobs at Lehman in London as new panic grips stock market

A total of 2,500 staff at Lehman Brothers' London headquarters were saved today when the bulk of its Canary Wharf operations were sold to a Japanese bank.

The non-US investment banking and share trading arms of the collapsed Wall Street giant have been snapped up by Nomura, administrators PwC announced today.

Lehman Brothers went down on Monday, the first major victim of the five days of banking carnage that shook the world last week.

It was feared that as many as 4,500 jobs in London could be lost following the failure of the 158-year-old bank.

All quiet: Lehman Brothers Reception at Canary Wharf was empty today, but many of the bank's 5,000 London staff will keep their jobs

Dan Schwarzmann, joint administrator and partner at PwC, said: "We are able to confirm that we have secured a sale of the investment banking and equities business of Lehman Brothers in the UK and Europe."

As well as the European headquarters in London the deal covers offices in Holland, Qatar, Dubai, Kuwait, Spain, Italy, Germany and Sweden.



The deal was announced as shares plunged again when the City was spooked by a warning of "very serious-consequences" by the head of America's Federal Reserve if its proposed US bank lifeboat fails.

By mid afternoon the FTSE was down 71.6 to 5164.6, with high street banks among the biggest fallers.



Ben Bernanke, chairman of America's central bank, urged Congress to back the $700 billion bail-out to stabilise financial markets.



Bought up: A man walks past a sign board of Nomura Securities branch in Tokyo. It has bought the European operations of failed U.S. investment bank Lehman Brothers

Concerns that Democrat-dominated Congress could block the scheme - a last hope to prevent a catastrophic meltdown of America's banking system - sent share markets around the world on a renewed slide in the past 24 hours.



In testimony for delivery to the Senate Banking Committee, Mr Bernanke said: "Global financial markets remain under extraordinary stress. Action by Congress is urgently required."



In separate testimony, US Treasury Secretary Henry Paulson said: "We must take further, decisive action to comprehensively address the root cause of this turmoil."



Leading Democratic-politicians have objected to the plan on the grounds that it throws a lifeline to banks without their top executives paying a price for their ill-judged loans. Some have called for a limit on the pay packages of bank directors.



The Bank of England said it would make another £21.6 billion available to the money market in a bid to encourage lending between nervous banks.



Back down: A woman is silhouetted as she walks past a board displaying the Hang Seng Index in Hong Kong as it plummets this morning

In separate testimony, US Treasury Secretary Henry Paulson said: "We saw market turmoil reach a new level last week, and spill over into the rest of the economy. We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil."

But leading Democratic politicians have objected to the plan on the grounds that it throws a lifeline to banks without their top executives paying a price for their ill-judged loans. Some have called for a limit on the pay packages of bank directors.

The Bank of England said it would make another £21.6 billion available to the money market in a bid to encourage lending between nervous banks.

The Prime Minister Gordon Brown is facing pressure from the White House to launch his own bank rescue here.

Mr Paulson wants foreign leaders to follow him and use public money to buy toxic debts off the hands of beleaguered banks.

But there are fears Mr Paulson's package could get bogged down in partisan wrangling in Congress.

Both sides of the political divide in the U.S. have voiced doubts over how fast the bail-out can be introduced.

'This is more of a concept than a plan. The scepticism in the market is beginning to build,' said Joseph Brusuelas, chief U.S. economist at California-based Merk Investments.

'It's not clear who is going to be allowed to participate. How much will each individual bank be allowed to dump on the public?'

Some economists also fear the plan could raise inflation by pushing up oil prices.

'A bigger trade deficit may mean a weaker dollar. The weaker the dollar gets, the more expensive oil gets,' said U.S. oil analyst Phil Flynn.

The White House has now run up a total bill of nearly $1.8trillion (£975billion) supporting the financial system with rescue packages.

Some traders are worried this burden will stretch the American government's finances to breaking point, leading to a slump in confidence in the world's biggest economy.

Mr Brown and Chancellor Alistair Darling have pledged support for international action on the credit crisis, but they are unwilling to extend to massive cash injections like that announced by the Americans.

Some U.S. politicians are furious with the suggestion that foreign banks could benefit from cash provided by American taxpayers.

Controversially, HSBC, Royal Bank of Scotland, and Barclays are all planning to offload billions of pounds of toxic assets on to the Americans.

Yesterday President Bush said the 'whole world' was watching to see if Republicans and Democratic lawmakers can quickly agree on a plan to halt the financial crisis.