Wall Street awoke Monday amid a nightmare as a rapid succession of events took down two of Wall Street's most storied investment banks and put AIG, the nation's largest insurance company, in deep financial peril.

Lehman Brothers Holdings Inc., the parent of what was once the bluest of the blue-chip investment banks, early Monday morning filed for Chapter 11 bankruptcy protection with hope that it can continue operating while it finds buyers for its broker-dealer and Neuberger Berman Holdings subsidiaries.

Late Sunday, Bank of America, the nation's largest bank, announced a $50 billion all-stock deal to buy Merrill Lynch & Co., ending the 94-year run of Merrill as an independent entity.

And AIG, battered by investors late last week and into Monday, struggled to raise cash and raised the prospect that it may need help from the U.S.Federal Reserve.

Stocks opened sharply lower, with the Dow down more than 300 points shortly after the markets opened. Losses narrowed as trading wore on but were still back down 315 points on the Dow at noon.

Still, market analysts were saying all morning that the market was operating in a orderly fashion, and, although down, was not crashing.

Builder stocks held up relatively well, with most of the big publics off by low-to-mid single digit percentages. The iShares Dow U.S. Home Construction ETF (NYSE:ITB) was down 2.28% at $17.65. The SPDR Home Builders ETF (Amex:XHB), more heavily weighted into building materials and retailers, was off 3.1%% at $20.59.

More bad news came via the Federal Reserve, which reported Monday that industrial production dropped 1.1%, far more than the 0.3% decline expected by economists.

Meantime, Wachovia Securities home building analyst Carl Reichardt was out with a note to investors Monday analyzing the impact of Hurricane Ike on the public builders active in Texas. Reichardt said no builder had as yet reported major damage, noting that most of the devlopment activity around Houston is to the north and west of the city. He pointed out that Meritage, with 23% of its total community count associated with the market, has the highest exposure in the Houston market.