Gov't, Wall St. Race To Save Lehman

List Of Buyers Narrows But Parties Involved Still At Loggerheads

(AP)  The field of possible buyers for Lehman Brothers narrowed Saturday but the parties involved in the discussions over the wounded investment bank's future were at loggerheads over how to finance the rescue.

An investment banking official said Bank of America Corp. and Britain's Barclays Plc have emerged as the front runners for Lehman Brothers after a possible cash injection from its rival Wall Street banks and brokerages.

Top officials from the Federal Reserve and the Treasury Department and executives from several Wall Street banks met at the New York Fed's downtown Manhattan headquarters Saturday for the second day in a row try to hash out a deal to rescue Lehman Brothers.

The financial world was watching. Failure could prompt skittish investors to unload shares of financial companies, a contagion that might affect stock markets at home and abroad when they reopen Monday.

Discussions are expected to continue Sunday, said Andrew Williams, a spokesman for the New York Fed.

The investment banking official, who asked not to be named because the talks were ongoing, said the investment houses were balking at paying to polish up Lehman's balance sheet so Bank of America or Barclays could buy a financially clean firm.

He said the investment banks were angling for the government to provide some money, as it did when it helped JPMorgan Chase & Co. buy Bear Stearns in March, because they would get little to nothing in return for their help.

The government has drawn a line in the sand over using taxpayer money to help rescue Lehman Brothers, however.

The official said the talks were tense and neither side appeared willing to back down.

Besides selling the company whole or piecemeal, Lehman could be liquidated, perhaps with financial firms agreeing to still do business with the company as it wound down.

Or, a financial company or companies could buy Lehman's "good" assets. Its shunned or devalued real-estate assets could be placed in a "bad bank" financed by other banks.

Saturday's participants included Treasury Secretary Henry Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox.

Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, and Merrill Lynch & Co.'s John Thain were among the chief executives at the meeting.

Representatives for Lehman Brothers were not present during the discussions.

They gathered on the heels of an emergency session convened Friday night by Geithner - the Fed's point person on financial crises.

Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance.

Geithner convened the meeting Friday evening and told bankers gathered at the New York Fed to come up with a solution or risk being the next to go under, investment banking officials with direct knowledge of the talks said. They spoke on condition of anonymity because the talks were ongoing.

A spokesman for Lehman declined to comment about the meeting.

Other potential buyers could include Japan's Nomura Securities, France's BNP Paribas and Deutsche Bank AG. All have declined to comment.

Participants in Saturday's meeting were also trying to tackle a broader agenda that includes problems at American International Group Inc. and Washington Mutual Inc., said the investment bank officials, who were briefed on the talks.

AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. Investors, worried they do not have enough cash on their balance sheets to withstand further hits, unloaded their shares on Friday.

AIG's shares dropped about 31 percent on Friday. WaMu's shares shed about 3.5 percent. Shares of investment bank Merrill Lynch & Co. Inc. also lost 12.3 percent. Lehman's stock closed at $3.65 Friday - an all-time low and down nearly 95 percent from its 52-week high of $67.73.

Lehman Brothers and AIG are the top priorities, said the investment banking officials. WaMu insisted Friday it has adequate capital to fund its operations even as it announced another multibillion dollar write-down on bad mortgage loans.

WaMu has 76 percent of its deposits insured by the Federal Deposit Insurance Corp., an independent agency created by Congress to insure deposits in banks and thrifts up to at least $100,000. AIG has lost more than $18 billion over the last three quarters due to investments tied to subprime mortgages.

Global fears intensified Saturday that Lehman's collapse would stagger markets and undercut confidence in the U.S. financial system.

Germany's Finance Minister Peer Steinbrueck urged that a resolution be found before Asian markets open, warning ominously, "the news that is coming out of the U.S. is bad."

Lehman Brothers Holdings Inc. put itself on the block earlier this week. Bad bets on real-estate holdings - which have factored into bank failures and taken out other financial companies - have thrust the 158-year-old firm in peril. It has been dogged by growing doubts about whether other financial institutions would continue to do business with it.

Richard S. Fuld, Lehman's longtime CEO, pitched a plan to shareholders Wednesday that would spin off Lehman's soured real estate holdings into a separately traded company. He would then raise cash by selling a majority stake in the company's unit that manages money for people and institutions. That division includes asset manager Neuberger Berman.

Government officials want to avoid a Bear Stearns-like bailout; the Fed in March agreed to provide a loan of nearly $29 billion as part of JPMorgan Chase & Co.'s takeover of the firm. Unlike Bear, Lehman can go directly to the Fed to draw emergency loans if it needs a quick source of ready cash. In recent weeks, though, there's been no indication that Lehman has done so.

Bear's sudden meltdown led the Fed to engage in its broadest use of lending powers since the 1930s. Fearful that other firms could be in jeopardy, the Fed temporarily opened its emergency lending program to investment firms, a privilege that for years was granted only to commercial banks, which are subject to tighter regulation.

Those actions - along with the Bush administration's take over of mortgage giants Fannie Mae and Freddie Mac just last week - have spurred concerns that taxpayers could be on the hook for billions of dollars and companies will be encouraged to take on extra risks because they believe the government will come to their aid.

Paulson and Bernanke, however, have said they needed to help Bear Stearns and Fannie Mae and Freddie Mac to avert a financial calamity that would devastate the national economy.

Lehman's Fuld is currently a member of the New York Fed's board of directors.

[random_radar]

"The government has drawn a line in the sand over using taxpayer money to help rescue Lehman Brothers"

The great thing about lines in the sand is you can brush over them and no one remembers where they were.

I will be curious to see what the government bail out looks like tomorrow morning...

[mcv57]

Now BofA is considering Myrill Lych. Are these guys on the board brain dead.

It is a BEAR market, da! Don''t acquisition a payroll of management who created the bad finanicial condition in the first place. I believe BofA is trying to immitate JPChase. Only JP Morgan got the treasury backing, BofA is dum enough to buy without out it! What blindness and arrogance! Hmmmmmmmm, UBM is doing good ... if they get greedy I am going to dig a hole somewhere.

[skysoldier75]

Wall Street now struggles to look solid and respectable, but it''s becoming more apparent by the day that it''s been built upon a deep swamp of financial corruption, and is rapidly sinking into that muck.

At any time investors could wake up to find themselves totally wiped out, with absolutely no remedy or recourse.

When the "house built out of cards" collapses, it''s going to take down all the cards, not just the crooked ones.

[lewiston14]

In these days I should get a rubber stamp that says "I promise to pay it back%u201D And in little letters %u201CWhen my job comes back home%u201D Else go stuff it. I should work in Washington!

[beehive21-2009]

Someone said, 75 % of Corporations in the USA pay no taxes,Wonder if this company ever paid any, and how much ? this feels like another one of Bush and Cheneys ,money making schemes.

The main thing is do not panic,there will be plenty of that going on already,sit back and enjoy the show,goin be whole lotta hangin goin on, before it''s over.

[lewiston14]

Greenspan actually had some words I agree with. He said our economy is in such bad shape its starting to effect the entire global economy. While he did not come right out and say it I think he had that grin that this could level the playing field and bring everybody back to their senses. Just because we owe China trillions does not mean we have to pay any of it back. Sure they will grab some of our companies (remember the ones that took your jobs and have no business being there anyways) they going to cut off the lead toothpaste and toxic foods. Remember that they have a trade surplus with us we have a deficit with them. BUT with out us their economy would go down the drain also. Quickly I might add. We may not be able to borrow 100%u2019s of billions more for wars but is that a bad thing? clever way to keep Washington under control. Kind of like a credit card. Things are going along fine then you loose you job. Nothing coming in = nothing going out. To bad for the banks that think the solution is to raise the interest rates if people were paying something back at 10 percent think what 30 percent will do. That 20 percent interest increase just finished that idea off. They wont work with anybody so you just ignore them and laugh when they go under.

[mapjo11]

Wow. Barclay''s just backed out. It''s unlikely that BAC and others will do a deal. That''s it. There will be a market meltdown on Monday. It will be a bloodbath. Sell. Sell. Sell. This will be a depression the likes of which none of us has seen in our lifetime. Man...do you realize this probably means it will be decades before we get more republicans in office?

[kenammons]

i hope for once the government does the right thing and not put the taxpayers on the hook to cover losses by wall street big shots. put them in prison for something and let the people who put money in these investments suffer there just losses

[gwjackie]

The Goverment knew what they were doing when they have the employer take out the tax money from your pay because if 75% OF THE PEOPLE STOPPED PAYING UNTIL THEY DID WHAT THE SHOULD WOULDN''T THAT BE NICE!

[gwjackie]

Most of these people should be in jail!

[gwjackie]

Ithink this country is headed for a civil war and SOON

[gwjackie]

I why the Goverment can bail out every scum bag in the country and let them go free but when it comes to the working class people that pay the taxes. There is never enough money for health care,or ss or anything but there is always enough money to take care of there buddys. these things must stop. The American need to kick the people out of office regardless of party!

[ubrew12]

imprisonrove said: "Can anyone explain to me how there''s always money in the Treasury to bailout friends of the regime (Freddie & Fannie alone cost $200 bill), but there isn''t enuf to fund universal healthcare, which even the most exhorbitant estimates calculate would only be around a half-billion?

What''s wrong with this picture, indeeed!? "

Its called priorities. I have a relative that lives in Kona, Hawaii. On Friday night, Wall Street bankers fly their private jets to Kona for the weekend. The airport there literally fills up (one end of it) with private jets, which then leave Sunday night. Its good to be ''too big to fail'', yes?

[GHookway]

Ya think they might bail me out ? lmao

[jydavis1]

ELITE Street continues to crumble - this is only a good thing !

[lewiston14]

hbevis: Tell you friend in Ireland many of us think about it everyday. There is just nothing we can do about any of it.

[iphyt4u]

Georgie can bail out another bank, and then maybe we can use it as a homeless shelter for the common people who are having their tax dollars stolen.

[jerkytree]

It is interesting to note that Lehman Brothers paid its broakers 25 Billion in so called BONUSES! Now they cry help!!! Oncle SAM come to our rescue or else. We must really look pretty silly to the rest of the world.

[skyk239]

Voter are so Dumb Downed

Posted by WarDogLRS at 11:03 PM : Sep 13, 2008

So we''re not going to talk about the "Trickle Down" Economic GARBAGE that go us here are we?? It seem''s you clowns always want to point fingers well how about pointing the finger at the PARTY and the LEADER who LIED us into this mess. The ONE who said HIS "Trickle Down" would take that Balanced Budget and Surplus and turn it into great things for you and I!! ANYONE fool enough to vote for 4 more years of this with McSame needs their heads checked...

[williewomper]

Our founding fathers would not even recognize this country. It has been bought off by the rich, sold out by the corporations, invaded by illegals and become a military agressor nation. One day real citizens of our constitution will revolt and punish the ones that have done this to our America. The day is fast approaching.