A possible deal to salvage Lehman Brothers took shape today but cast a dark mood over Wall Street, the Wall Street Journal reports. Washington refused to save the ailing bank, sparking a plan for either Barclay's or Bank of America to buy "good" Lehman assets while other banks propped up an $85 billion "bad" Lehman bank—a move that could send ripples of pain through the financial industry.
Observers fear that Lehman's fire sale prices may hurt other banks' portfolios, compelling them to raise more capital—or that firms backing the "bad" bank may need to call in loans and spark more selling that depresses prices. "Unless something is settled, it's going to be a bloodbath Monday," one source close to the deal said. Talks are expected to continue tomorrow.