As Lehman tries frantically to sell itself, it is also working with the government to help resolve the situation. For now, the government appears to be resisting a Bear Stearns-style bailout, but there’s still time–especially as potential Lehman buyers coyly sit on the sidelines until the government gets involved.
WSJ: The Federal Reserve and Treasury have been working with Lehman to help resolve the bank’s situation, including talking to potential buyers of the firm, according to people familiar with the matter. Any possible resolution is not expected to involve a government bailout along the lines of the rescues of investment bank Bear Stearns Cos. and mortgage giants Fannie Mae and Freddie Mac. A deal could be finalised in time for the Monday opening of markets in Asia and much could change between now and then.
It would be politically challenging for the government to craft another Bear Stearns-like rescue for Lehman, particularly coming so soon after it agreed to take over Fannie and Freddie. The Fed has grown increasingly uncomfortable with the growing perception that it will craft bailouts for the U.S. economy.
Sen. Richard Shelby, (R., Ala), said the Fed should not rush in to rescue Lehman. “I hope they will not use all their powers or all their rabbits in doing this,” Mr. Shelby said in an interview on C-SPAN’s Newsmakers.
The Fed and Treasury can resist all they want, but having stepped in at the last second to backstop Bear, it’s hard to see how they’ll be able to avoid doing so this time. And, ironically, that actually may be hurting Lehman Brothers: Given that the potential buyers probably know the government will act, there’s no reason for them to make any move until the risk has been taken out of the trade.
So get ready for another bailout. But this time, don’t expect Lehman’s shareholders to escape with $10 a share.
Charlie Gasparino at CNBC has an update on the possible buyers. He also reports that the Fed and Treasury are involved in the discussions.
Troubled investment bank Lehman Brothers is continuing to negotiate a sale of itself to large commercial banks. These banks include Barclays, Bank of America and HSBC. Company officials are trying to get a deal wrapped up and announced by Sunday night, people close to the deal tell CNBC.
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