Ah, heck, I go to all the trouble to write up my thoughts, and then the WSJ puts out an article that I could have simply posted instead.
All the major points are covered here (emphasis mine):
A sale of Lehman to either Barclays or Bank of America Corp. remained dependent on government financial support, according to people familiar with the situation. According to these people, Barclays appeared to be moving more aggressively in trying to find a way to complete a deal.
That, however, would put any proposed deal at odds with the government’s reluctance to step in with funding. Discussions are expected to begin again this morning at the New York Fed. Wall Street’s top executives attended meetings yesterday before departing in black town cars Saturday evening.
Under a plan that was crystallizing Sunday, either Barclays PLC or Bank of America Corp. would buy Lehman’s "good assets", such as its equities business, people familiar with the matter say. Lehman’s more toxic, real-estate assets would be ring-fenced into a "bad" bank that would contain about $85 billion in souring assets. The move would avert a flood of bad assets deluging the market, damaging the value of similar assets held by other banks and insurers.
It’s all there. What I love the most is the very open admission that as long as we can put the "bad assets" into a place that nobody agrees to look at or think about too carefully, that somehow this will help.
When the official, best response is the equivalent of three monkeys with their hands over their eyes, ears, and mouth, it’s time to begin thinking that maybe, just possibly, the situation is out of hand.