The WSJ is showing a breaking news flash that there is an emergency meeting of the NY Fed underway to discuss the Lehman situation.

BREAKING NEWS:

New York Fed holds emergency meeting to discuss Lehman situation with Wall Street executives.

I’ll update when I know more….

Update (via the WSJ):

The Federal Reserve Bank of New York held an emergency meeting Friday night with top Wall Street executives to discuss the future of venerable firm Lehman Brothers Holdings Inc. and the parlous state of U.S. financial markets.

The meeting, which began at 6 p.m., was called by the New York Fed in an attempt to find a solution to the problems plaguing Lehman. The group, which consisted of the heads of most major financial institutions, is expected to meet throughout the weekend to see if it can agree on some way to rescue the ailing firm, according to a person familiar with the matter.

Looks like Paulson may have reached the limit of his government credit card:

Treasury Secretary Henry Paulson has made it clear to participants that no government bailout should be expected, this person said. Representatives of the banks plan to continue meeting to try and forestall a collapse of Lehman, which could hurt their firms and Wall Street in general.

Lehman has access to the Fed borrowing facilities if it needs it and Paulson apparently thinks that is enough.

The same suitors are mentioned: BAC as the most likely buyer with Barclay’s and HSBC also considering it. Goldman took a look at the real estate holdings:

Other parties were looking only at pieces of Lehman, with Goldman Sachs Group Inc. interested in some of the securities firm’s huge real-estate portfolio.

This is one of those come to Jesus meetings as my Dad would say. The meeting included Timothy Geithner of the NY Fed, Paulson, and Chris Cox from the SEC and the heads of Morgan Stanley, JP Morgan, Merrill Lynch, Goldman Sachs, Citi and Royal Bank of Scotland. The Feds are telling these guys to put some of those rocket science investment bankers in a room and get a deal done. Now.

Lehman may be in pieces by Sunday….

Update II: The WSJ has another update that says the saga may end tonight:

Talks continued Saturday between federal officials and top Wall Street executives aimed at resolving the crisis swirling around Lehman Brothers Holdings Inc. and soothing jittery U.S. financial markets.

While the situation remains fluid, some sort of solution might be reached as soon as Saturday night, according to people familiar with the situation. But it isn’t clear how much progress has been made toward clearing the biggest hurdle in the discussions, which is whether any government funding will be provided to help engineer a rescue for the battered investment bank.

They don’t give any reason in the article for their optimism that a deal will get done by tonight. If anythingm, it appears that the big hurdle is still whether the government will provide any backstop. The answer is apparently still NO.

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