Joining the mass of speculation on the subject of what Lehman CEO Dick Fuld intends to do to get his firm back on the straight-and-narrow, is The Wall Street Journal. In its 'breakingviews' section the newspaper reflects that Lehman 'may need to lop off two limbs (to survive) - one infected, the other healthy'.

The column speculates that Fuld may sell $65bn of toxic securities at a discount of some 15% (taking a $10bn hit in the process), and could then sell all or part of Lehman's asset management business and private clients unit to plug the gap. These actions, the column pontificates, will take Lehman off 'the risk list', leaving it free to 'focus on running its business rather than crisis management'.

Reuters reports that Merrill Lynch analyst Guy Moszkowski has said that Lehman is likely to suffer $2.5bn in additional writedowns in its residential mortgage portfolio in the third-quarter, and may post a loss in the period. Moszkowski, who recently met with senior Lehman executives, said that the firm's management was comfortable with its liquidity and capital adequacy position.

Bloomberg reports that bondholders are now demanding the highest rate of interest from Wall Street firms since 2000, and that Lehman has seen its borrowing costs for 5-year bonds rise to 7.7% from 5.2% 6 months ago. And concerns are growing for all investment banks who will need access to the bond market to fund their activities. The news agency quotes William Cohan, a former investment banker at Lazard and author of The Last Tycoons, who said: 'If you're going to be a big user of capital, then you have to be worried about how you finance your business......A lot of these guys don't know what to do. They're frozen, and they're just hoping that in time things will get better'. William Larkin, who oversees fixed-income at Massachusetts-based Cabot Money Management, said that investment banks will need to change their business models 'as the credit markets change, and nobody knows what that new income driver is going to be. It's like a black box'.

Finally, a Lehman official has denied claims made in a story run by India's Economic Times, which said that the firm is to lay-off up to 25% of the 700 staff in its captive back-office unit in Mumbai.

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