The IHT has what seems to be a more in depth article about the Lehman negotations. Maybe they have better sources than the WSJ?:

Wall Street firms would buy the $30bn-plus of property assets held in Lehman Brothers’ “bad bank” in order to facilitate a rescue takeover for the embattled financial group, under one of the options being discussed by industry executives and regulators.

Financial chiefs have so far expressed reluctance to back the plan but remained locked in discussions with Treasury and Federal Reserve officials in New York Saturday in an effort to solve the crisis at Lehman before the markets open on Monday, according to people close to the discussions.

They stressed that the plan to take the commercial assets of Lehman’s balance sheet, modelled on the company’s own proposal for a spin-off the assets into a listed company, was only one of the ideas being discussed and that no decision had been made.

This is just a variation on the plan that Lehman was already working on to spin off their real estate holdings. I’m not sure how this would work if the other banks are involved. Would they have to pay for the assets? What if the assets have no value? How do you determine that? Lots of questions….

This is very intersting:

Bank of America is seen as the leading candidate to buy Lehman. It is considering a possible joint takeover bid with JC Flowers, the financial investor, and China Investment Co, the Chinese sovereign wealth fund. UK bank Barclays is also interested. The three could combine, with the BofA consortium buying Lehman’s investment bank and Barclays taking its asset management arm, which includes Neuberger Berman.

Okay, I admit, I really like this option with Barclay’s ending up with Neuberger Berman. I just bought Barclay’s recently and my guess is this would be seen as a positive for BCS stock. NB is the jewel here. What is an investment bank worth? Not a lot in the way of assets there; just name and talent really. Why not just wait for bankruptcy, buy the name on the cheap and hire away the bankers?

The bottom line is this: if the bad assets are worth less than the debt owed on them, somebody has got to take a hit. How much of Lehman’s debt should be paired with the assets being spun off into the “bad bank”? Who takes the loss after shareholders? It certainly should’t be taxpayers…..