The Associated Press is reporting that there are two plans at work to provide for two different tools for staunching any contaminant from a Lehman Brother’s collapse.

• The Fed is considering opening up it’s emergency lending facilities, perhaps by being open to more toxic collateral or by allowing more borrowing.
• Meanwhile, banks are mulling the creation of an emergency lending pool of money worth up to $50 billion that could be used to aid faltering financial companies.

The Wall Street Journal says Merrill’s board is meeting right now to discuss an all-stock buyout offer from Bank of America: “Details of the terms under discussion weren’t immediately clear but Merrill’s board was reportedly meeting to approve an offer at $29 a share, which would value the firm above $40 billion.”

One of the patterns that has emerged this year has been for major actions regarding faltering financial firms to be announced on Sunday night before markets in Asia opens. We’re now just a little under two hours away from the markets opening in Australia. In Japan, South Korea, Beijing and Hong Kong, however, the stock exchanges won’t open at all. They are closed for holidays.

As long as we’re broadening the storyline tonight from the narrow Lehman Brothers collapse, we might as well note that the Wall Street Journal is reporting that AIG is going to announce a restructuring on Monday morning.

AIG’s management team was scrambling on Sunday afternoon to cobble together the plan and present it to the insurer’s board for approval, the people said. The insurer, which has already raised $20 billion in fresh capital so far this year, was also in discussions with several private equity firms about a capital injection and hoped to raise more than $10 billion, the people said.
AIG considered selling or spinning off the aircraft-leasing arm — International Lease Finance Corp. — earlier this year but decided in June to keep it. Since then, AIG’s position has deteriorated, however, making a disposal more likely.

It’s amazing how quickly this story about the Bank of America acquisition of Merrill is happening. DealBook has some details:

Bank of America is in advanced talks to buy Merrill Lynch for at least $38.25 billion in stock, people briefed on the negotiations said on Sunday, as a means to preserve that investment bank while Lehman Brothers looks likely to collapse.
The move suggests a desperate effort at triage on Wall Street, as Bank of America works to shore up the likely next victim of the credit crunch. A deal, valued at between $25 a share to $30 a share, could be announced as soon as Sunday night, these people said. Merrill shares closed at $17.05 on Friday.

As we first learned from our commenters, banks and brokers today are hold a special session for netting derivatives transactions with Lehman. The idea is to cancel trades that offset each other, reducing the number of trades that would have to be settled if Lehman files for bankruptcy tonight.
So far we haven’t heard how the session, which was supposed to last from 2 PM to 6 PM, is going. There should be about an hour left in the session. Can anyone lend us a hand in helping us understand this? Feel free to leave a comment below, email us at tips@dealbreaker, or text us at 646-526-FEAR. Thanks.

One thing that has been obvious today is that our networks and cable news channels are completely inadequate to the task of covering a story like this weekend’s Lehman Brothers negotiations. CNN, MSNBC and Fox News all remained steadfast in their political coverage. We couldn’t imagine a weekend when we were less interested in listening to Barack and Joe, John and Sarah and all their surrogates trade mostly-dull “barbs” over policy issues. Bloomberg TV broadcast prefab news for most of the day, with hourly updates today. CNBC didn’t broadcast any new content yesterday, and is right now showing an infomercial entitled “Houses for $300,” which seems unhelpful.
Fortunately, that’s about to change tonight. Starting at 8 PM ET CNBC will run a “Special Report” about the fall of Lehman Brothers. It will be anchored by Dylan Ratigan and Melissa Lee. Special will include reports from CNBC Global Headquarters from CNBC On-Air Editor Charlie Gasparino and CNBC Senior Economics Reporter Steve Liesman. It is scheduled for one-hour, but might go longer depending on breaking news.

Breaking: Bloomberg is reporting that Bank of America is walking away from the deal for Lehman! The WSJ say BofA is in possible merger talks with Merrill Lynch!
Feelings of frustration turned to futility this afternoon, as many working on the frantic negotiations over the fate of Lehman Brothers acknowledged that an acquisition or division of the firm was looking less and less likely and the firm would probably be liquidated in a bankruptcy.
Late last night many believed a deal had been reached with a consortium of international financial firms contributing capital to fund a new “bad bank” entity that would take most of Lehman’s toxic real estate assets while Barclays, Nomura and Bank of America acquired a “good bank” of Lehman’s healthier business. That deal fell apart today, although the exact reasons remain unclear. Some say Dick Fuld played a role by initially resisting the deal on the grounds that it disadvantaged Lehman’s shareholders, others say Barclays toppled it by holding out for a government backstop of Lehman’s obligations.
At Lehman Brothers tensions became so intense that a fist fight broke out between two employees, according to a witness.
“It’s over,” one person familiar with the matter told DealBreaker.
CNBC’s Charlie Gasparino reported earlier this afternoon that firms involved were preparing for an orderly bankruptcy, with Bank of America taking a role to back up Lehman’s swap trades.
Of course, it’s still possible that a deal for Lehman could be worked out. Many believe that the situation has now moved beyond Lehman, with the primary concern being on containing contagion from the collapse of Lehman. This may explain how Merrill and Bank of America have found themselves in merger talks.