Barclays walks away from deal to rescue Lehman Brothers
By James Quinn in New York
6:28pm BST 14/09/2008
UK Telegraph
British bank Barclays has decided to walk away from talks to buy some or all of troubled US investment bank Lehman Brothers.
Barclays, whose negotiating team is led by Barclays Capital chief Bob Diamond, is in the process of informing Lehman and the Federal Reserve Bank of New York that it no longer wants to take part in the discussions because of the US government's unwillingness to guarantee Lehman's assets.
Although Barclays is understood to be happy that the New York Fed was leading discussions for Lehman's $41.8bn of troubled property assets to be ring-fenced, it is unhappy with the fact that its balance sheet would still be exposed to all the remaining counter-party and other risks within Lehman.
Under UK Listing Authority rules, the third-largest British bank would have to hold a full shareholder vote if it were to provide such a guarantee itself, something that is impossible to do given the race to secure a buyer as quickly as possible.
The decision by Mr Diamond, who has been looking for ways to catapult Barclays' into Wall Street's top tier, has been taken with the full knowledge of Barclays group chief executive John Varley and the rest of the board.
The surprise decision leaves a consortium led by Bank of America as the only potential buyer for Lehman, whose fate remains precarious. One sourrce suggested that the move could be merely a negotiating tactic by Barclays to force US Treasury Secretary Hank Paulson to offer a guarantee.
A team of senior Barclays executives, including Bob Diamond and Jerry del Missier, the chief executive and co-president of Barclays Capital respectively, have been locked in talks aimed at finding an appropriate structure for a takeover of Lehman.
Bob Diamond, is an American born in Massachusetts. He has been with Barclays since 1996, and caused a stir in 2006 by becoming the highest paid CEO among the FTSE 100, taking home an estimated £22,000,000, up slightly from the £21m he earned in 2005. He is an avid supporter of the Boston Red Sox.
