Lehman's credit crisis, which has made $3.9 billion third-quarter loss, the largest in its 160 year history, has forced the intervention of the US Federal Reserve and Treasury to lead a bail out by possibly funding the purchase of Lehman Brothers by another bank, possibly in a fashion similar to its facilitating the acquisition of Bear Sterns by JP Morgan. (See: US Fed clears JP Morgan's acquisition of Bear Stearns bank) 

The government bail-out plan is involves an agreement where public money is not involved in the rescue of Lehman by finding several buyers to acquire different divisions of the bank and hope to have a deal in place by this weekend before the Asian markets open on Monday.

The collapse of the sub prime mortgage market that has caused more than $500 billion of losses and writedowns, Lehman's market capitalisation has been beaten down to $9.5 billion and it's stock has fallen 76 per cent since the last 12 months.

In a bid to shore up its balance sheet before closing its books for the third quarter on 31 August, Lehman had been sourcing the globe for investors including sovereign wealth funds, but none of the deals have materialised over difference in valuations.

Last month Korean Development Bank, keen to take over Lehman Brothers in consortium with other Korean banks, withdrew after Korean regulators warning KDB that Lehman was a risky deal. (See: Korean regulator restrains KDB over Lehman deal) 

Lehman's boss Richard Fuld had announced plans to slash its dividend and spin off about $30 billion of real estate assets and split the remainder into two banking entities, one with good loans and the other with bad housing-backed assets.

Financial analysts in the US are surprised with Uncle Sam coming to the rescue of private financial institutions as it now finds itself knee deep in the direct management of the private sector companies by rescuing four of the country's biggest financial institutions, Bear Stearns, Fannie Mae, Freddie Mac and now Lehman Brothers.

In the rescue of Fannie Mae and Freddie Mac, the government had used its broad regulatory powers to compel both the companies to accept a federal takeover wherein hundreds of billions of dollars of taxpayer's money would be required to be lent or invested in salvaging the two companies. (See:Fannie Mae and Freddie Mac)

Fannie and Freddie together own or guarantee half the nation's mortgages. Their failure could have caused the flow of mortgage money in the US to freeze up.

Experts opine that if lines are not drawn, companies might take more risk, knowing that Washington will bail them out.

This week three large automakers have asked the government to give $25 billion to $50 billion in federal loans to the auto industry for developing more fuel-efficient vehicles. This loan if passed will also be taxpayer's money.