Lehman has Street's trust, for now, traders say

By Dan Wilchins and Jennifer Ablan

NEW YORK (Reuters) - Wall Street is all about trust, and Lehman Brothers appears to still have it -- for now, anyway.

Fear that the company could suffer the same fate as Bear Stearns Cos Inc hit its stock hard on Friday.

But a half-dozen hedge funds that Reuters spoke to were not unwinding their trades with Lehman Brothers Holdings Inc, and said they had no trouble trading with it. Two dealers said they were conducting business as usual with Lehman.

Bear, heavily exposed to the faltering U.S. mortgage market, burned through cash and lost access to funding this week as clients pulled out assets and unwound trades.

Lehman, the fourth-largest U.S. investment bank, is more diversified than Bear, the fifth-largest. It has more than $195 billion of assets at its ready disposal and says it can fund its operations for 12 months without outside financing.

But Lehman does have extensive mortgage assets, and one credit derivatives dealer, speaking on condition of anonymity, said his bank was pulling back on its exposure to Lehman, as were his clients.

Rumors of funds unwinding positions with Lehman abounded, with everybody from risk management consultants to hedge fund managers to traders having heard them.

Lehman shares were down more than 14 percent while shares in the top three U.S. investment banks lost only 5 or 6 percent. Bear Stearns shares lost nearly half their value.