* Financials drop as investors fret about Lehman

* Paulson "adamant" no govt money in any Lehman deal

* Aug retail sales fall, but Sept consumer mood rises

* Dow off 0.6 pct, S&P off 0.2 pct, Nasdaq off 0.3 pct (Updates to afternoon)

NEW YORK, Sept 12 (Reuters) - U.S. stocks fell on Friday as fears about the survival of investment bank Lehman Brothers and the possibility of more mortgage-related losses at American International Group weighed on financial shares.

A more than 6 percent decline in General Electric (GE.N: Quote, Profile, Research) shares also weighed on the S&P 500 index, offsetting gains by utilities and natural resource companies.

Jitters about additional mortgage losses at American International Group (AIG.N: Quote, Profile, Research) pushed the stock down more than 27 percent, making it the top drag on the Dow.

Lehman also remained in focus as shares hit a 14-year low amid uncertainty about what form a possible deal to rescue the firm would take.

Sources with direct knowledge of the talks said U.S. authorities were in intensive discussions with Lehman on options including an outright sale. For more see [ID:nSP6809].