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.
"Nothing short of a miracle can save Lehman as is," said Anthony Sabino, professor of law and business at St. John's University. "It is highly unlikely Lehman will be in existence on Monday morning."
Late Friday, the Federal Reserve Bank of New York held an emergency meeting with top Washington policymakers and major financial institutions to discuss Lehman's future.
Attendees included Treasury Secretary Henry Paulson; Christopher Cox, chairman of the Securities and Exchange Commission; and Timothy Geithner, president of the Federal Reserve Bank of New York.
Fed spokeswoman Michelle Smith declined to disclose what financial institutions participated or whether the group had reached any conclusion. The Wall Street Journal reported on its Web site that the group included Morgan Stanley chief executive John Mack and Merrill Lynch chief executive John Thain, among others.
Other financial firms may swallow portions of Lehman's investment banking or bond trading 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.
Potential buyers could include Bank of America Corp., Britain's Barclay's Plc, 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 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 U.S.
As it grew, it also took on greater risk, including 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 money management unit and spinning off most of its real estate investments into a separate publicly traded company.
