Barclay’s and BofA lead to take over Lehman

My, how fast news moves. This Sunday morning story about possible Lehman buyers, listing Barclay’s and Bank of America, was hugely out of date hours later. Neither will pull the trigger before the 9 a.m. Monday opening bell on Wall Street.

That, in turn could send the market plunging, especially depending on what the assessment is of Hurricane Ike damages by that time.

The holdup is that both would-be buyers have said they’d like some sort of federal guarantee, which ain’t gonna happen.

So, as I first blogged Friday, the options are:
• A fire-sale price;
• Bankruptcy;
• And, a new option No. 3, where Lehman’s bad debt gets dumped in a pool and divvied up somehow, to make it a better sale target, similar to Long-Term Capital Management in 1998.

One option on the fire sale would be a sale in pieces. As for the “bad debt” or “bad bank” idea, lots of financial companies that were flush in 1998 aren’t now.

Barclay’s, as of Saturday, was reportedly in the running, but the British bank has pulled out, specifically over Treasury Secretary Henry Paulson’s refusal to grant a guarantee deal like that in the Bear Stearns bailout.

Bank of America was reportedly also a suitor. Make that one a definite was.

You can count out Bank of America now, too. It dropped out for the same reasons as Barclay’s.

That sound you here is Lehman stock already plummeting amongst Asian traders, and about to do so in Europe.

That said, I’ll offer up 1-in-5 odds that, despite all the talk about how the government “doesn’t want this to happen,” etc., Lehman files for bankruptcy before the end of this week, probably before the end of business Wednesday.