*Lehman nears liquidation

Barclays, which had emerged as the leading contender to buy all or part of the investment bank, says it couldn't reach a deal because the feds are unwilling to provide the necessary financial support. From the WSJ:

The situation was rapidly evolving, and it's possible Barclays or another bidder would emerge to save Lehman before markets opened Monday. But with the government balking at putting any taxpayer money at risk for Lehman, the likelihood of a transaction was dimming. That would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm.

The Barclays' deal had involved dividing Lehman into a "good bank" and a "bad bank." Under that idea, Barclays would take the "good bank" portion and a group of 10 to 15 Wall Street companies would take the bad stuff. But for whatever reason, that plan appears to be down the drain. Here's the NYT story.

*In an extraordinary move, traders handling derivatives at many Wall Street firms were told to come to work as word of the Barclays' failed deal began spreading. So how exactly would a liquidation happen? From the NYT:

One option that was discussed on Saturday would have major banks and brokerage firms continue to do business with Lehman as it unwinds its assets and liquidates over a period of months, according to several people briefed on the discussions. That would buy Lehman time to sell those assets in an orderly way and avoid a fire sale that could depress prices of similar assets held by other banks. The overarching goal of the weekend talks was to prevent a quick liquidation of Lehman, a bank that is so big and so interconnected with others that its abrupt failure would send shock waves through the financial world. Of deep concern is what impact a Lehman failure would have on other securities firms, insurance companies and banks, notably the American International Group, both of which have come under mounting pressure in the markets.