Only a day ago, the head of Lehman Brothers, the beleaguered investment bank, sought to assure Wall Street that the firm could survive on its own.
But those assurances seemed empty on Thursday as Lehman’ share price went into another free-fall, declining 41 percent, to $4.22.
As confidence in Lehman’s survival has faded, the chairman and chief executive, Richard S. Fuld Jr., has stepped up efforts to sell the 158-year-old bank, people briefed on the conversations said Thursday. Lehman, which had been negotiating to sell its prized investment management division, is now seeking to sell the entire company.
Among the potential suitors are Barclays of Britain and the Bank of America, these people said, as well as several private equity firms. In each case, the suitors are seeking help and assurances from the Federal Reserve to help make an acquisition palatable.
Barclays and Bank of America are seeking assurances that the Fed would guarantee a part of Lehman’s troubled assets, these people said, similar to the way it backstopped Bear Stearns’s portfolio during the sale to JPMorgan Chase.
While Mr. Fuld, who is also a director of the Federal Reserve of New York, has been in constant contact with regulators, it remained unclear whether the Fed will help, these people said.
The notion of a providing a guarantee as part of sale to a foreign buyer would be a tricky issue for the Fed. Without such assistance, potential suitors have suggested they would “walk,”s according to person briefed on the discussion. Fed officials have hinted that they would be more receptive to a bank buying Lehman, rather than a private equity firm.
At this point, Lehman hopes to buy enough time to reach the weekend so that it can complete a deal. But as its share price continues to decline, Lehman is coming under increased pressure to get a deal done. Spokesmen for the Federal Bank of New York and Lehman declined to comment.