As Lehman officials talked of liquidation, Merrill Lynch said it found a buyer -- Bank of America -- that will pay about $50 billion for the brokerage, The New York Times reported.

A financial crisis also is in the offing for insurance giant American International Group, also affected by staggering losses from the credit crisis, the Times said. AIG sought $40 billion from the U.S. Federal Reserve, indicating it could have only days to survive if it doesn't receive financial assistance.

"My goodness. I've been in the business 35 years, and these are the most extraordinary events I've ever seen," Peter Peterson, co-founder of the private equity firm the Blackstone Group, who led Lehman in the 1970s, told the Times.

To keep cash flowing in the financial markets, the Federal Reserve announced new lending procedures, while 10 major banks combined to create a $70 billion fund, The Washington Post reported.

The steps the Fed announced Sunday, Fed Chairman Ben Bernanke said in a statement, "are intended to mitigate the potential risks and disruptions to markets."

The U.S. Treasury Department and the Federal Reserve had stepped in several times previously to rescue the financial markets -- helping to broker a deal between Bear Stearns and JPMorgan Chase, then agreeing to bail out Fannie Mae (NYSE:FNM) and Freddie Mac. (NYSE:FRE)