When Bear Stearns (NYSE: BSC) went belly up last month, some observers blamed vicious rumors and short-sellers looking to make a quick buck. When Overstock.com CEO Patrick Byrne wasn't thrilled with his company's share price a few years back, he blamed short sellers as well. Weeks before Countrywide Financial (NYSE: CFC) got taken out, rumors sent it into a tailspin. MF Global's (NYSE: MF) 50% nosedive last month? Chalk that up to rumors, too.

Embattled investment bank Lehman Brothers (NYSE: LEH), however, is fighting tooth and nail to avoid that path. Earlier this week, Lehman raised $4 billion in capital after CFO Erin Callan admitted that the firm may have suffered from the same rumors that caused Bear Stearns to surrender to JPMorgan Chase (NYSE: JPM). Lehman needed to show the market that it could still march with its head held high.

Not long ago, Lehman insisted its capital and liquidity remained adequate, and it felt confident that it could weather the storm. What lies behind the sudden change of heart? "Unfortunately, we're in a market where perception trumps reality," Callan told CNBC. With negativity piling up at the door and skittish investors watching vigilantly, Lehman decided to pre-emptively reload its coffers to stave off critics, including myself, who thought Lehman was next to be flushed down the credit-market toilet.

Lehman sold 4 million convertible-preferred shares at $1,000 a pop. Those shares carry an initial dividend of 7.25%, and they can be converted into 20.05 shares of common stock, representing a one-third premium over Lehman's share price before the news was announced. Some analysts think that much new capital could water down Lehman's earnings power by as much as 10%, but let's be serious here. Given the choice of a minor earnings dilution or a visit from the Grim Reaper, Lehman probably made a pretty sensible move.

Negativity not welcome here
Lehman isn't taking any baloney from short-sellers anymore. The new capital was specifically raised using convertible shares, rather than common stock that could be turned around and short-sold again. Furthermore, Lehman notified the Securities and Exchange Commission that swarms of hedge funds may have colluded to drive Lehman's stock into the ground, cashing in on short positions. Whether or not anyone can actually prove legitimate market manipulation is another question, but the mere act of trying to get the SEC involved will likely dissuade shady activity.

For Pete's sake, is this over yet?
If you had told anyone just a few months ago that a titanic bank like Bear Stearns would bite the dust, you would have drawn blank stares. Then it happened, straight out of left field. Each remaining player in the game now knows the importance of reassuring the market that come hell or high water, it'll do everything necessary not to let liquidity become an issue.

UBS (NYSE: UBS) recently threw in the kitchen sink, writing off another $19 billion in credit losses, and showed its longtime chairman the door. Are such drastic moves entirely necessary? Probably so, now that the full extent of the subprime gorging is starting to emerge. Nonetheless, if banks can finally purge their loads of debt-related nastiness, short-selling investors will have a tough time searching for more hullabaloo to chew on.

Foolish final thoughts
It's easy to forget that the same irrational emotions that allowed investors to applaud banks that leveraged themselves up to the stars can work just as well in reverse. The problem, as we've seen with Bear Stearns and Thornburg Mortgage (NYSE: TMA), is that sour moods and short-sellers can turn troubled companies into corporate corpses before anyone gets another say. Of course, many financial firms dug their own graves over the past few years, but when short-sellers purposely try to collude to cause more pain than is already on the table, companies must take drastic measures to survive. Lehman proved this week that it's well aware of the market's increasingly pessimistic mood, and it took quick action to do something about it. In a market like this, those are survival skills Bear Grylls would envy.

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