Mohamed El-Erian sums it up nicely with the word “unthinkable”

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In an interview with Reuters, PIMCO CEO Mohamed El-Erian sums up the day’s events so far quite nicely: “In today’s highly disrupted financial markets, the unthinkable is thinkable.”

He was playing off the news of a rare, emergency trading session Sunday afternoon to let Wall Street derivatives dealers reduce their exposure to Lehman Brothers, in case the embattled investment bank files for bankruptcy Sunday night.

That’s looking more and more likely, considering that both Bank of America and Barclay’s have seemingly pulled out of negotiations to absorb Lehman.

And yet that’s not even the most interesting thing that’s happened today.

In a classic case of bringing one girl to the dance and leaving with another, Bank of America is now in advanced talks to buy Merrill Lynch. That phrase “advanced talks” comes from Dealbook, as does the reported price tag: Between $25 and $30 a share (Merrill shares closed at $17.05 on Friday).

It makes me wonder who’s got Washington Mutual in a corner.

UPDATE: I’m sorry, I meant AIG.

Barbara!

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