Lehman Brothers Holdings Inc. said Monday it lost $2.8 billion in the second quarter and plans to sell $6 billion in stock to beef up its capital base.

Chief Financial Officer Erin Callan said in a conference call that the company has completed its develeveraging program of selling assets and raising equity, and is using its new capital to expand its business.

Lehman plans to raise $4 billion by offering 143 million shares of common stock at $28 apiece, expanding the bank's shares outstanding by 25%. The company is also selling $2 billion in preferred shares that will carry an 8.75% yield and be convertible into common stock in a price range between $28 and $33 each.

The sales should be completed Thursday. Lehman shares recently traded down about 10% at $29.01.

The projected loss, the first since Lehman went public in 1994, is four times worse than Wall Street's most pessimistic estimate, highlighting the consequences of the bank's huge buildup of mortgage and LBO debt during the credit boom. The stock sale is also bigger than analysts had expected.

Yes, that is largely true. It makes me said that the whole banking industry right now is in a big credit crunch. Even though the rates are low, no one wants to lend money to each other any more.