UPDATE: As of Saturday evening, Lehman's fate still hangs in balance. Sale seems less likely. Details here.
EARLIER: The Fed and Treasury held a secret meeting with the heads of the five families (CEOs of all the big firms) last night to craft a solution to:
- Lehman (LEH)
- The worst financial crisis since the 1930s
The meeting took the form of a game of chicken: The government said "we have to work together." The heads of the Wall Street firms said, "Lehman rolled the dice and lost...why should we be forced to pick up the tab?
Because you'll be next, the government said.
Hank Paulson appears to be sticking fast to the admirable line in the sand he drew yesterday: The bailouts stop here. Hank is presumably gazing over the shoulders of the crippled Lehman to Merrill (MER), WaMu (WM), Wachovia (WB), AIG (WIG), and a host of other firms that could come begging in the months ahead. And he has taken the perfectly reasonable position that he gave Wall Street seven months of Fed help and warnings to get its act together...and they didn't.
Wall Street, meanwhile (including potential Lehman savior Bank of America) is taking the position that no way are they buying Lehman and taking the risk that all that balance-sheet crap will blow them to smithereens, too. So if you want to save your precious financial system and economy, Hank, you'd better toss some more grease into the wheels.
Lehman, meanwhile, told its 25,000 resume-polishing employees on Friday afternoon that the solution (whatever it is) will be decided by Sunday afternoon. At this point, Bank of America, JC Flowers, Barclays, and/or some private equity firms appear likely to lug off some or all of what's left.
Stay tuned.
See Also: Lehman Death Throes, Complete
