The WSJ says Lehman will likely raise between $3 billion and $4 billion. That would add to the big cash the investment bank has raised in the last year and would dilute shareholders who are down 50 percent in 2008.

In the past year, Lehman has raised $6 billion in capital, including $4 billion last quarter. The firm’s financial position was further strengthened in March when Lehman, like all U.S. investment banks, was allowed to borrow directly from the Federal Reserve against a variety of collateral, which gives it ready access to considerable funding. The availability of Fed funding significantly reduces any worries that Lehman and other firms might suffer a cash crunch.

Nonetheless, some investors remain concerned that relative to its size, Lehman is holding more securities tied to both residential and commercial real estate than any other big Wall Street broker, according to Bernstein Research.

All this bad news makes financial stocks tumble

Financial stocks were down broadly yesterday on the Wachovia and WaMu news, plus credit downgrades of Lehman, Merrill Lynch and Morgan Stanley.

The NYT and WSJ report on their respective C2’s that a British mortgage lender’s shares plunged 24 percent as it “was forced Monday to seek emergency help from investors and cut the price of a planned share sale as more borrowers defaulted on mortgages, sowing fears that the global credit crisis was weighing heavily on the broad economy,” the NYT says.

The FT says all total, the news raised worries that the credit crisis is not over.

Grasso still chasing his money

The NYT on C1 looks at whatever happened to Dick Grasso, the nonprofit executive who retired with a $185 million package. It finds that things for the extraterrestrialish former head of the New York Stock Exchange are looking up, what with some of his foes and former cohorts vanquished. Tormentor Eliot “She Knows What… You Want” Spitzer is in out of the governor’s mansion and in hiding somewhere while Bear Stearns CEO Jimmy Cayne, who approved Grasso’s package, is retired somewhere on a golf course or at a bridge table (which, come to think of it, is where Cayne would be if Bear were still a going concern anyway—he’d just still be drawing tens of millions of bucks for the privilege).

The Times says Grasso’s legal challenge to keep his staggering retirement deal is looking good (for him) with a New York court “imposing a high legal burden… to prove that Mr. Grasso had used devious means to secure his pay.”

At the height of the public furor over Mr. Grasso, such a burden may well have been cleared. Now, Mr. Spitzer’s reputation as a crusading prosecutor lies in ashes, and some of the chief executives who approved Mr. Grasso’s contract—like Mr. Cayne and E. Stanley O’Neal, then of Merrill Lynch—have been at center of the Wall Street subprime credit collapse, losing many billions of dollars of shareholder funds. A juror, new to the case, may very well ask, who is the bad guy here?

A glimmer of hope in manufacturing

In economic news, a manufacturing index showed recessionary levels for the fourth straight month, but was slightly better than expected. The WSJ says on A3 that the report shows “the economy is stagnant but not collapsing.” The weak dollar boosted exports, which partially made up for anemic domestic demand.

Construction spending dropped 0.4 percent on a seasonally adjusted basis.

Investors on hot seat for food crisis

The Times on C1 says commodities regulators are stepping up their oversight of markets by requiring more data from investors to determine whether they’re “artificially driving up world food prices.” It will also investigate whether a cotton price spike in February was driven by illegal activity.

The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.

But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market…

The commission has come under fire… for not doing enough to monitor the impact of these investors on markets that have such influence on family budgets nationwide.

Which regulators haven’t come under fire (justifiably) lately for not doing enough in their respective jobs?

Big advertisers want Google to stop piggybacking

The Journal on B1 says Google faces “growing” anger from some big advertisers who are ticked that it sells ads to smaller companies who use their trademarks to draw clicks—a phenomenon known as “piggybacking.”

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.