Feds, Execs Regroup to Negotiate Lehman Deal

As top Wall Street executives arrived Sunday morning for another round of talks to resolve the Lehman Brothers crisis, sources said the group continued to work on how to handle the possibility of a deal not getting done before Monday.


By mid-morning, Federal Reserve Chairman Ben Bernanke was said to have been involved in several conversations by phone from Washington with officials meeting at the New York Federal Reserve. In addition, Bernanke was said to have made several calls already to foreign central bankers who are monitoring the proceedings carefully.

New York Federal Reserve President Tim Geithner and Treasury Secretary Hank Paulson were already at the New York Fed by the time executives from top Wall Street firms began to arrive.

Work went on through the night on a deal drafted Saturdayto have a consortium of banks backstop Lehman's bad assets and sell off the rest of the bank to Bank of America and Barclays. But sources said key parts of the deal remained controversial Sunday morning. As reported, the banks backstopping the bad loans were said to be balking at the amount of capital required of the banks and the sense that they were supporting a good deal for Barclays and Bank of America.

The larger group has been broken up into several working groups to devise responses to different possible outcomes. Among those, how markets can prepare for the possibility that Lehman might not find a buyer before Monday.

Sources said the possibility of some kind of deal being struck this weekend still existed.