Today, shares of Lehman fell dramatically on rumors that they might be “next” in losing liquidity among the Wall Street brokerage houses. The attached story ran today on the wires:

AP
Lehman Brothers Drops on Investor Fears
Monday March 17, 3:09 pm ET

Lehman Brothers Plunges; Analysts Doubt the Investment Bank Is Next Credit Crisis Victim NEW YORK (AP) — Lehman Brothers Holdings Inc. lost nearly half its value on Monday, as the investment bank was swept up in a crisis of confidence following news of JPMorgan & Chase’s government-backed takeover of Bear Stearns.In afternoon trading, Lehman shares plunged $14.83, or 37.8 percent, to $24.43. At one point on the day the stock fell to $20.25, its lowest since June 2000. The stock plunge slashed Lehman’s market capitalization to $12.96 billion, compared with about $20.8 billion at the close of trading on Friday.

As Wall Street absorbs Bear Stearns’ sudden and dramatic downfall, investor attention has turned to the question of who might be next. Lehman, which has substantial exposure to the subprime debt that brought down Bear Stearns, is the target of much of that speculation. The bank is scheduled to report its first-quarter earnings Tuesday.

Fears about Lehman were stoked by news reports that DBS Group Holdings Ltd., Southeast Asia’s largest bank, instructed traders in an e-mail early Monday not to do business with the bank. According to Dow Jones Newswires, DBS Group later told traders to disregard the earlier e-mail. Lehman denied there were any problems with DBS.

Lehman Chief Executive Richard Fuld denied Monday that the firm was facing similar liquidity issues to Bear Stearns and, in several research notes released Monday, analysts tended to agree with that assessment.

Buckingham Research Group analyst James Mitchell said Bear Stearns “was in a somewhat uniquely challenging situation when the market’s confidence in the company vanished,” as compared to other investment banks.

Specifically, analysts noted that Lehman’s liquidity position is the strongest of the group.

The liquidity review, Mitchell said, “does seem to point to a somewhat unique failure at Bear Stearns, which gives us some comfort that other firms are in relatively good position.”

Mitchell also said Bear going away would free up market share for competitors.

“Lehman is not Bear,” said Deutsche Bank analyst Mike Mayo, who maintained the company’s “Buy” rating. “The industry issue seems more liquidity than solvency, and Lehman protected itself more fully after it’s problems similar to (Bear) in 1998,” Mayo said.

UBS Investment Research analyst Glenn Schorr downgraded Lehman shares to “Neutral” from “Buy” along with other companies in the sector, reflecting the perception that it may be “next on the list” — though he was quick to offer a caveat.

“For what it’s worth,” Schorr said, “we think Lehman is an excellent company that is far more diversified (by product & geography) than Bear, has a deeper capital base and far better liquidity position, and has done a great job managing risk in this incredibly challenging environment.”