Barclays Balks Before Bluff Blows Bank Buy

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One of the most interesting developments in the Lehman debacle must be the abrupt departure and the return (which followed hard upon) of Barclays as a Lehman suitor.
Hazarding a guess, one might think that Barclays was trying to stare down Paulson, pressing for federal backing of the potential toxic waste Barclays would have to take on in a Lehman purchase. After all, Jamie got the government to blink, why shouldn't our friends from across the pond? That didn't work so well. Bailing out a major counter-party and prime broker (and coping with the moral hazard problems that brings) was one thing, supporting a foreign buyer was a no-go and I suspect not a small number of risk arb managers who figured that out on Friday did fairly well today.
Still, The Wall Street Journal points out that Paulson was in no mood to nursemaid another transaction no matter who the buyer. Our own John Carney makes the case for a tempestuous and unpredictable Paulson. And for Barclays' part, well, they look a bit silly now that their bluff bombed. But then, it tends to illuminate the desperation Lehman must feel that they seem to be ignoring all the bluster and continue to act as if nothing at all has happened now that the Brits are back bidding.
John Mack escapes with my favorite quote from the morass that is Lehman's disposition: "If we're going to do this deal, where does it end?"

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