Now the eyes of investors and the world turn who might be the next Wall Street (or European investment banking) firm to fall. Odds are on Lehman Brothers.

Reuters says Lehman’s shares “have been battered by fears it may face liquidity issues similar to Bear Stearns” and the wire service reported Saturday that it has lots of exposure to mortgages and that some investors are pulling their money back from the bank.

Here’s BusinessWeek:

But Lehman Brothers Holdings Inc. appears to be an investment bank that investors are very worried about right now—mainly because it is the investment bank that is most similar to Bear in structure and exposure. Its stock dropped more than 14 percent on Friday.

Banks gave Lehman a vote of confidence of sorts, however, on Friday—Lehman Brothers said its new credit facility was “substantially oversubscribed,” and that some of world’s largest banks participated.

The NYT says Merrill is also being watched.

Indeed, investors are taking a grim view of the prospects for other investment banks like Lehman Brothers and Merrill Lynch. Managers of hedge funds and mutual funds say the problems at Bear confirmed their worst fears about the brokerages — that they have relied too much on leverage and have done a poor job managing the risks they took on during the boom…

And while Bear’s peers on Wall Street are not yet in such dire shape, they have surely accepted the reality of leaner times and lower valuations in the months to come.

Here’s our Quote of the Day, from the NYT:

“Banks and brokerages are a house of cards built on the confidence of clients, creditors and counterparties,” Mr. Trone said. “If you take chunks out of that confidence, things can go awry pretty quickly. It could happen to any one of the brokers.”

Who, us worry?

In non-Bear Stearns news, but going back to what triggered it all, the Los Angeles Times reports more on the story of how subprime lenders ignored warnings from people they paid in order to churn out more dodgy loans. This is a solid piece of reporting.

They could see the meltdown coming.

Freelance financial watchdogs who examined the paperwork on sub-prime home loans being sold to Wall Street had an inside view of the boom in easy-money lending this decade. The reviewers say they raised plenty of red flags about flaws so serious that mortgages should have been rejected outright—such as borrowers’ incomes that seemed inflated or documents that looked fake—but the problems were glossed over, ignored or stricken from reports.

The loan reviewers’ role was just one of several safeguards—including home appraisals, lending standards and ratings on mortgage-backed bonds—that were built into the country’s complex mortgage-financing system. But in the chain of brokers, lenders and investment banks that transformed mortgages into securities sold worldwide, no one seemed to care about loans that looked bad from the start. Yet profit abounded&mdas;huntil defaults spawned hundreds of billions of dollars in losses on mortgage-backed securities.

Bringing it all back home.

Bullied buck

In economic news, the Fed’s moves and concerns about the solvency of American institutions sent the dollar tumbling again, this time to a thirteen-year low against the yen and a record low against the euro. Bloomberg reports some investors say Bernanke has triggered a “vicious circle of doom for the dollar.”

Gold jumped by 3 percent and crude oil was up nearly 2 percent on the inflation-inducing Fed policies.

Bloomberg says the cost of insuring corporate debt soared more than 15 percent overnight in Japan.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.