The Wall Street firm that started the US cotton trade about 150 years ago and financed the railroads that built a nation might soon fade into history. Just days after Lehman Brothers Chief Executive Richard S. Fuld tried to pitch Wall Street on a plan to save the firm by shrinking it, he's in complicated negotiations with potential buyers that may see the company sold piecemeal as soon as Sunday night, analysts said. “Lehman Brothers, the Federal Reserve, the Treasury Department, and potential suitors are locked deep in the caverns of their headquarters having intense discussions about who gets what chunk of Lehman,” said Anthony Sabino, professor of law and business at St. John's University. “Nothing short of a miracle can save Lehman as is. It is highly unlikely Lehman will be in existence on Monday morning.” Prospective buyers, which could include Bank of America Corp. and Britain's Barclay's Plc, may swallow portions of Lehman's investment banking or fixed-income business, analysts said. Considering the firm's deep financial problems, riskier assets like its mortgage and real estate portfolios could be sold for just pennies on the dollar. Others said to be interested include Japan's Nomura Securities, France's BNP Paribas and Deutsche Bank AG. All have declined to comment. Randy Whitestone, a spokesman for Lehman Brothers, declined to comment on the firm's situation Friday. On Friday, Lehman's stock closed at $3.65 - an all-time low and down nearly 95 percent from its 52-week high of $67.73 as investors grew more convinced that Lehman may be auctioned at fire-sale prices. The stock's plunge was a humiliating beating for the 158-year-old investment bank, one of Wall Street's oldest firms, and for Fuld, 62, who has run the bank through internal squabbles, the technology bust, and the 9/11 attacks that destroyed its headquarters. The company's roots began in 1844 when Henry Lehman immigrated from Rimpar, Germany to Alabama, where he established a dry goods store that catered to local cotton farmers in Montgomery. Lehman Brothers evolved from merchandising to a commodities broker, and then later into underwriting where the firm helped finance construction of the Pennsylvania Railroad, among others. Lehman built its reputation on trading government and corporate bonds. Over his 15 years at the helm, Fuld expanded the firm's repertoire to investment banking and money management for wealthy clients. He also stretched its overseas reach to better compete with big rivals like Goldman Sachs Group Inc. About half of the firm's profit comes from outside the US. As it grew, it also took on greater risk, including with the kind of real estate investments that have forced global banks and brokerages to write down more than $300 billion since the subprime mortgage crisis undermined the credit markets. On Wednesday, Lehman reported it lost almost $4 billion because of the sales and write-downs on its residential and commercial real estate assets. Its total losses for the year added up to $6.9 billion. To shore up confidence among investors and its customers, Lehman presented a plan that called for selling its investment management unit and spinning off most of its real estate investments into a separate publicly traded company. The attempt failed, forcing Fuld to consider sell the firm he has worked at since 1969. The downfall of Lehman Brothers is eerily familiar to how the government helped engineer Bear Stearns' sale to JPMorgan Chase & Co. in March with a deal backed by a $29 billion loan from the Federal Reserve . The difference this time is the government is not likely to provide any financial backing. Treasury Secretary Henry Paulson is against any use of government money in whatever deal comes together for Lehman, a person close to his thinking said Friday. Unlike Bear Stearns, which happened swiftly and with little warning, financial markets have been aware of Lehman's troubles for a long time and have had time to prepare. Bear Stearns also was not able to borrow directly from the Fed. Lehman could because the Fed opened the borrowing spigot for investment banks after Bear Stearns imploded. Also, the government might not want to give investors the impression that it is the financial savior of troubled banks, analysts said. Instead, the feeling in Washington is that financial institutions will live or die by the free market. “I would not be surprised if Hank Paulson is now wondering why he ever took the job of Treasury Secretary,” said Peter Cohan, who runs management consulting and venture capital firm Peter S. Cohan and amp; Associates. “I have to believe that there are all sorts of people on Wall Street wondering whether they simply can't take the risk of continuing to do business with Lehman. And if that happens, Paulson will need to decide whether to let it fail, force a merger or bail it out.” Lehman Brothers - despite its tarnished image - has been one of Wall Street's most respected franchises. The company's investment banking and trading operations routinely appear in industry league tables that tally performance. For instance, Lehman Brothers is ranked eighth in the global mergers and acquisitions league tables so far this year, advising on deals with a total value of $105 billion, according to financial data provider Dealogic. Fuld said during a conference call Wednesday that the firm's core businesses remains healthy. Banks such as Bank of America may be interested in Lehman's investment banking division. With Bank of America, for example, a deal with Lehman Brothers would instantly catapult it to the top of the investment banking league tables, and enable the combined firm to become a formidable competitor. For Barclays, buying Lehman would instantly boost its presence in the US and give it a stronger position in equity and debt markets. Whoever buys Lehman or its individual assets will have their own knot of problems to untangle, however. “The damage is done,” Sabino said. “The house has been burned to the ground, now you're just picking through the ashes.”
