It's Sunday morning and the Lehman sale or breakup has not been resolved. The New York Times, Wall Street Journal and Financial Times are all reporting that talks are moving forward but that no buyer has emerged, but Barclay's appears to be the front runner. There is interest in Lehman's "good" assets, but the current plan has Lehman's $30 billion of "bad" assets being spread across various Wall Street firms. And here is the rub. The Wall Street firms are not willing to take on these "bad" assets (mostly real estate related) without Government assistance. This gaffe from the Financial Times may be the key:
Hank Paulson, Treasury secretary, has been adamant that no government money would be involved this time. The US authorities may offer other help, including flexibility on regulatory issues, such as treatment of private equity firms involved in a deal.If the government loosens the regulatory constraints it may get the deal done. It may set a precedent and allow private equity firms and hedge funds to help banks. This reminds me of the saying "Be careful for what you wish for, you just may get it." If a deal is not done today, tomorrow is going to be a wild day across the world. The Asian markets will give us a preview if a deal is not done before they open.