Government officials and top Wall Street bankers continued talks Sunday in a harried effort to sell Lehman Brothers Holdings Inc. and avoid a collapse of the beleaguered investment bank that could severely disrupt global markets. Barclays PLC, Britain's third-largest bank, backed out of talks on Sunday after emerging during the morning as a front-runner to take over Lehman's assets, according to a person inside the UK bank who spoke on condition of anonymity, in keeping with company policy. The person, who had knowledge of the talks, said the decision was “very unlikely” to change. He said Lehman was attractive but did not meet what he described as Barclay's stringent requirements. That could leave Bank of America Corp., the nation's biggest retail bank, and several private-equity firms among the narrowed group of bidders still at the table. Bankers and officials with direct knowledge of the discussions said they remained in complicated talks Sunday morning. They spoke on condition of anonymity because talks were ongoing. Top officials from the Federal Reserve and the Treasury Department and executives from several Wall Street banks were huddled at the New York Fed's downtown Manhattan headquarters for a third day seeking a solution to Lehman's financial crisis. Failure could prompt skittish investors to unload shares of financial companies, a contagion that might affect stock markets around the world when they reopen Monday. Asian markets will begin trading Sunday night Eastern time. The discussions were said to be tense as all sides try to hash out a plan to sell Lehman in whole or in pieces to a number of buyers. Bank of America, the nation's largest retail bank, and several private-equity firms are also among the bidders to buy Lehman's assets, officials briefed on the talks said. There were conflicting reports Sunday about how a deal could be structured, and when an announcement might come. Officials with knowledge of the talks said major banks were balking at paying to polish up Lehman's balance sheet so a suitor could buy a financially clean firm. The Fed and Treasury have said they won't use taxpayer money to rescue the bad mortgage-related assets that crippled the 158-year-old Lehman. A spokesman for Lehman declined to comment. A spokesman for BofA could not immediately be reached for comment. The Wall Street banks being asked to pitch in were angling for the government to provide some money, as it did when it helped JPMorgan Chase & Co. buy Bear Stearns in March. Treasury Secretary Henry Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox were among those taking part in the meetings. Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance. Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, and Merrill Lynch & Co.'s John Thain were among the chief executives at the meeting. The bankers and government officials were also trying to tackle a broader agenda that includes problems at American International Group Inc. and Washington Mutual Inc., said the investment bank officials, who were briefed on the talks.
