Lehman seen in sale talks as survival questioned

By Patrick M. Fitzgibbons

NEW YORK (Reuters) - Lehman Brothers Holdings was forced into talks about a possible sale after the Wall Street investment bank's shares plunged more than 40 percent on Thursday, raising questions about its survival.

Lehman LEH.N and U.S. regulators were in intensive discussions about a number of options, including a complete sale, but the firm was resisting government intervention, a source with direct knowledge of the talks said.

Even so, media reports said the government, including the Federal Reserve, was helping to broker a deal to sell Lehman that could be completed as soon as this weekend.

The U.S. government is hoping to avoid spending money on a bailout, a source with direct knowledge of the situation said.

Bank of America Corp (BAC.N) or Barclays (BARC.L) could be suitors, according to various reports. Bank of America, Barclays and Lehman declined to comment.

Lehman Chief Executive Dick Fuld, long resistant of ceding the firm's independence, has been trying to sell just a part of the 158-year-old firm instead of the whole company, sources familiar with the situation said.

But investors, anxious for some kind of resolution, knocked down Lehman shares by 42 percent on Thursday as the dearth of information from the company stoked fears some clients and trading partners might take their business to more stable firms.

"Although many investors thought it would be avoided, customers of Lehman Brothers are becoming more and more skittish in their dealings with them," said William Lefkowitz, options strategist at vFinance Investments, a brokerage firm in New York.