I'm just interested to know what LEH broker/dealer counter parties are
supposed to do. What about hedge counter parties....any ideas,
anecdotal evidence etc.

There's a process called "netting" where they all get together and try
to figure it out.  In fact, when they announced a netting session last
night, that was the indication that none of the deals were going to go
through.  It's a complicated process, and it "works" because nobody
wins all the way, but nobody loses all the way either.