Bank of America (BAC) Currently Lehman's (LEH) Best Hope

Lehman (LEH) is in active talks with several possible buyers, the WSJ and NYT report.  The buyers are concerned about Lehman’s balance sheet and are looking to the government for support (a.k.a., trying to force the government to step up and backstop Lehman’s balance sheet the way it did Bear Stearns’). 

WSJ: A number of… buyers would “come out of the woodwork,” if the U.S. were to step in, said one person monitoring the process. It remains unclear whether the U.S. Treasury or Federal Reserve would take such steps, as was done when the government assisted J.P. Morgan Chase & Co. in its Bear Stearns takeover in March.

Bank of America, which is holding preliminary discussions about a transaction, appeared to be Lehman’s best hope on Thursday afternoon. BofA may only do a Lehman deal if it is encouraged by the federal government, since it has its hands full digesting mortgage lender Countrywide Financial Corp.

Still, the situation was so fluid Thursday that people involved in the deal talks said it was too soon to say what shape a sale would take or if it would happen at all.

A number of possible buyers have declined to participate in the absence of government support:

Without explicit government support, a range of other suitors have proven uninterested in absorbing Lehman and its $600 billion balance sheet. Goldman Sachs, for example, is not bidding on the company, said a person familiar with the matter. Other much-discussed buyers, including France’s BNP Paribas SA, the UK’s HSBC Holdings PLC, Germany’s Deutsche Bank AG, Spain’s Banco Santander SA, are not expected to participate.

One outside potential remains Barclays PLC, the UK’s third largest bank which has been eager to expand its investment-banking franchise around the globe.

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