Scramble to save Wall Street
Three of Wall Street's best-known institutions were huddled behind locked doors this weekend in frantic talks with US authorities and bankers to either sell their businesses or put together rescue packages.
Lehman Brothers, AIG, the giant insurer, and Washington Mutual, America's biggest savings and loans company, were all in negotiations with prospective buyers or bankers.
Britain's Barclays Bank, Bank of America, JC Flowers and the China Investment Corporation are said to be talking with Lehman over a potential sale of all or part of the beleaguered, 158-year-old bank.
Senior sources at Barclays confirmed that it is interested in Lehman, particularly the successful Neuberger Berman wealth-management business which would fit "neatly" with its own. One source said: "We are interested in the investment banking arm but also Neuberger. But I am not sure we will be allowed to buy it by the US authorities. We also have our own shareholders to persuade as they have only just helped out with the recent fund-raising."
Bob Diamond, Barclays' president and the chief executive of Barclays Capital, flew to New York at the end of last week for talks with Lehman's chairman and chief executive, Dick Fuld. Mr Diamond is known to want to expand in the US to become a "bulge-bracket firm".
Officials from the Federal Reserve and the US Treasury are involved in the Lehman talks, although the US authorities are acting only as "facilitators", helping to negotiate with potential buyers rather than extending their own financial support.
The Treasury Secretary, Hank Paulson, on Friday ruled out using any more taxpayers' money to bail out ailing firms following the controversial rescue last weekend of Freddie Mac and Fannie Mae, the $5 trillion (£2.8 trillion) mortgage companies which control more than half of the US mortgage market.
But Mr Paulson and Ben Bernanke, the chairman of the Federal Reserve, are keen to get a deal done by Sunday night before the opening of markets in Asia and London. One US official said: "We need to get Lehman sorted quickly to restore confidence in the financial markets."
Mr Fuld has been forced to look for a buyer following the collapse of confidence after his rescue package announced on Wednesday failed to win support. Lehman, which controls assets of around $600bn, had hoped that putting its $30bn commercial property portfolio into a separate company would bolster confidence. But its shares, which were $60 only six months ago, collapsed again to a 14-year low of $3.65 by Friday, valuing the bank at just $2.53bn.
Shares in AIG fell sharply again on Friday over worries that it faces bigger than expected losses on its mortgage exposure. AIG confirmed that it is in talks with bankers, JPMorgan over refinancing, and is due to put out a trading statement tomorrow morning. Shares in Washington Mutual also fell by a third last week to $2.73, on fears over its capital adequacy but it has ruled out holding talks with prospective buyers.
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