Anxious Lehman scours Wall Street for buyers

DOUGLAS HAMILTON

Published on 13 Sep 2008

Shares in Lehman Brothers Holdings fell to a near 14-year-low yesterday as Richard Fuld, the company's chief executive, searched for buyers for the troubled investment bank in a desperate move to restore investor confidence in one of America's biggest financial institutions.

Fuld and other top Lehman executives were scouring Wall Street, anxiously looking for a lifeline that would save the bank, which has lost more than 90% of its stock market value in the past year. They were working feverishly to find someone willing to buy all or part of the company, bankers and industry executives close to the situation said.

Fuld, who built Lehman into the biggest US underwriter of mortgage securities during his four decades at the firm, has long resisted ceding the Wall Street firm's independence but was pushed towards a forced sale after talks about a cash infusion from Korea Development Bank ended, This sparked a sharp drop in the firm's market value during the past few days.

Lehman shares fell by as much as 16% in early trading on the New York Stock Exchange yesterday as investors grew concerned that the institution would be unable to find a buyer because the US government was resisting calls to provide rescue funds. The stock later recovered some ground but still closed 57 cents lower at $3.65.

Bank of America and London-based Barclays have been mentioned this week as potential buyers, though one of Lehman's Wall Street rivals, Goldman Sachs Group, is not interested.

Lehman, one of Wall Street's oldest institutions, is in close contact with both the Treasury Department and Federal Reserve about how to proceed.

Although the Treasury Department and Fed were working to broker an orderly sale of Lehman, Washington sources said it is unlikely they would support a potential deal with government money. The sources said Treasury Secretary Henry Paulson is against any use of federal funds to bail out the stricken firm.

This reluctance would mark a departure from previous practice. The government spent billions of dollars to facilitate the sale of Bear Stearns in March and to rescue mortgage companies Fannie Mae and Freddie Mac this week.

However, potential buyers may balk at a purchase without the Fed's backing. If that were to happen, government officials would be left to evaluate what risks a sudden collapse of Lehman might pose to the broader financial system.

Lehman's troubles have knocked financial shares in London and other financial centres earlier this week. However, UK banks were in better shape yesterday, with Barclays closing 12p ahead at 350.5p and Royal Bank of Scotland rising 5.5p to close at 239.75p. But there was no such joy for HBOS, which slipped 4.75p to 282p.