Barclays to buy Lehman banking divisions

British banking giant Barclays said today it would acquire Lehman Brothers' North American investment banking and capital markets businesses for 250 million dollars (£138.9m) in cash.

Lehman filed for bankruptcy protection on Monday after it was unable to find financing or fresh capital to shore up its balance sheet amid the continued downturn in the credit markets.

Barclays says it will acquire Lehman's North American banking operations, which include Lehman's fixed income and equities sales, trading and research and investment banking business. About 10,000 employees work in the divisions.

Barclays will also purchase Lehman's New York headquarters and its two data centres in New Jersey for 1.5 billion dollars (£830m).

Barclays' announcement comes two days after it walked away from a deal to purchase all of Lehman Brothers.

But Barclays and Lehman reached agreement hours after Lehman's first bankruptcy hearing in a crowded court at the US bankruptcy court in Manhattan, just steps away from Wall Street's iconic bull statue.

JPMorgan advanced Lehman 87 billion dollars (£48.3bn) when the market opened on Monday, acting in part on a request by the Federal Reserve Bank of New York. The New York Fed later repaid JPMorgan that amount. Yesterday, JPMorgan advanced another 51 billion dollars (£28.3bn).

Shai Waisman, a lawyer for Weil, Gotshal & Manges, representing Lehman Brothers, argued in his opening statement that Lehman's Brothers' downfall was the result of a "chain reaction" of events that were largely out of the investment bank's control.

"Lehman operated in an extremely unfavourable business environment," Mr Waisman said, referring to declining asset values and low levels of liquidity.

Judge James Peck approved a motion that JPMorgan Chase & Co would remain Lehman's clearing house through the bankruptcy proceedings.

The issue arose over the past two days, when JPMorgan made the advances to Lehman to allow it to keep trading and "avoid a disruption of the financial markets", according to court filings.

Meanwhile the House of Representatives Oversight and Government Reform Committee said it would hold a hearing on September 25 to examine the "regulatory mistakes and financial excesses" that led to Lehman's bankruptcy filing. It asked Lehman chief executive Richard Fuld to testify before the committee.