EMPLOYEES of United States investment bank Lehman Brothers in Asia struggled to come to terms yesterday with the speedy redrawing of Wall Street's financial landscape, as the firm filed for bankruptcy.

One long-time Lehman worker called the mood "surreal".

Said the Hong Kong-based employee: "The end for Lehman was pretty ugly. They just ran out of options and time."

Lehman employs about 3,000 staff - excluding the India back office - in Asia, and the region has proved a sweet spot for the US bank as it made inroads into new markets.

Early yesterday morning, Lehman said it would file for Chapter 11 bankruptcy protection in New York for its holding company in what would be the largest failure of an investment bank since the collapse of junk-bond specialist Drexel Burnham Lambert 18 years ago, the Associated Press reported.

Lehman had expanded aggressively in Asia in the last two years, ramping up foreign-exchange and investment-banking operations in Singapore, Hong Kong and Mumbai.

It was also planning a bigger presence in China, where it recently advised Aluminum Corp of China (Chinalco), which teamed up with Alcoa, on its US$14-billion (S$20-billion) purchase of a stake in Rio Tinto.

The bank has been representing buyout firm Silver Lake in its bid for a stake in the mobile handset business of Chinese telecoms gear maker Huawei Technologies.

But Lehman's downfall leaves the fate of its advisory mandates uncertain.

"That hasn't been thought through yet," said an Asia-based Lehman investment banker, who did not want to be named.

Another Lehman banker in Asia said: "On the investment banking side, we need to take care of existing business with clients. Obviously, our clients are concerned. There is an existing mandate issue across the globe."

For many employees, news was hard to come by yesterday as it was a holiday in Hong Kong and Japan - home to Lehman's larger Asian offices.

At the bank's Singapore office at the downtown Suntec Tower, only a trickle of staff arrived for work, dodging reporters' questions.

Asked whether it was business as usual, a Lehman trader contacted by telephone said: "What business is there? There's nothing to do. All I've heard is what's being reported on the news."

A Lehman banker in Asia said: "At this point, we're told to come to work, business as usual. We're in uncharted territory here - there is no playbook."

Lehman employees in Mumbai, where the firm runs back office functions including technology support, said they were still waiting for some indication of what happens next.

"The atmosphere here is tense, but the management is continuing to run the show as usual," said one employee.

There was more uncertainty in Australia, where Lehman entered markets last year through the acquisition of Grange Securities for about US$98 million.

Looking ahead, market analysts queried whether this was the end of the credit crisis.

"This is like Voldemort. You think he's dead and he resurfaces time and again," said Nomura Australia equity strategist Eric Betts, referring to the evil character in the Harry Potter novels.

Meanwhile, 10 of the world's biggest banks agreed to establish a US$70-billion emergency fund, with any one of them able to tap up to a third of that.

The 10 are Bank of America, Barclays, Citigroup, Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, JPMorgan Chase, Merrill Lynch, Morgan Stanley and UBS.

Lehman collapsed under the weight of toxic assets - mainly related to real estate - that are now worth only a fraction of their original prices.

One of the catalysts for this weekend's events was the stance of US Treasury Secretary Henry Paulson, who was strongly opposed to using government money in any deal aimed at resolving the Lehman crisis.

The government has so far sponsored rescues of Bear Stearns and mortgage lenders Freddie Mac and Fannie Mae.