NEW YORK (AP) – The Wall Street firm that started the U.S. cotton trade before the Civil War and financed the railroads that built a nation might soon fade into history.

Just days after Lehman Brothers Chief Executive Richard S. Fuld tried to pitch Wall Street on a plan to save the firm by shrinking it, he’s in complicated negotiations with potential buyers that may see the company sold piecemeal as soon as Sunday night, analysts said.

“Lehman Brothers, the Federal Reserve, the Treasury Department, and potential suitors are locked deep in the caverns of their headquarters having intense discussions about who gets what chunk of Lehman,” said Anthony Sabino, professor of law and business at St. John’s University. “Nothing short of a miracle can save Lehman as is. It is highly unlikely Lehman will be in existence on Monday morning.”

Prospective buyers, which could include Bank of America Corp. and Britain’s Barclay’s Plc, may swallow portions of Lehman’s investment banking or bond trading business, analysts said. Considering the firm’s deep financial problems, riskier assets like its mortgage and real-estate portfolios could be sold for just pennies on the dollar.

Others said to be interested include Japan’s Nomura Securities, France’s BNP Paribas and Deutsche Bank AG. All have declined to comment.

Randy Whitestone, a spokesman for Lehman Brothers, declined to comment on the firm’s situation Friday.

On Friday, Lehman’s stock closed at $3.65 – an all-time low and down nearly 95 percent from its 52-week high of $67.73 as investors grew more convinced that Lehman may be auctioned at fire-sale prices.

The stock’s plunge was a humiliating beating for the 158-year-old investment bank, one of Wall Street’s oldest firms, and for Fuld, 62, who has run the bank through internal squabbles, the technology bust, and the 9/11 attacks that destroyed its headquarters.

The company’s roots began in 1844 when Henry Lehman immigrated from Rimpar, Germany to Alabama, where he established a dry goods store that catered to local cotton farmers in Montgomery. Lehman Brothers evolved from merchandising to a commodities broker, and then later into underwriting where the firm helped finance construction of the Pennsylvania Railroad, among others.

Lehman built its reputation trading government and corporate bonds. Over his 15 years at the helm, Fuld expanded the firm’s repertoire to investment banking and money management for wealthy clients. He also stretched its overseas reach to better compete with big rivals like Goldman Sachs Group Inc. About half of the firm’s profit comes from outside the U.S.

As it grew, it also took on greater risk, including the kind of real estate investments that have forced global banks and brokerages to write down more than $300 billion since the subprime mortgage crisis undermined the credit markets.

On Wednesday, Lehman reported it lost almost $4 billion because of the sales and write-downs on its residential and commercial real estate assets. Its total losses for the year added up to $6.9 billion.

To shore up confidence among investors and its customers, Lehman presented a plan that called for selling its money management unit and spinning off most of its real estate investments into a separate publicly traded company.

The attempt failed, forcing Fuld to consider selling the firm he has worked at since 1969.

In March, the government helped engineer Bear Stearns’ sale to JPMorgan Chase & Co. with a deal backed by a $29 billion loan from the Federal Reserve .

The difference this time is the government is not likely to provide any financial backing.

Treasury Secretary Henry Paulson is against any use of government money in whatever deal comes together for Lehman, a person close to his thinking said Friday.

Unlike Bear Stearns, which happened swiftly and with little warning, financial markets have been aware of Lehman’s troubles for a long time and have had time to prepare.

The government may also be less willing to bail out Lehman because the firm has been able to borrow money directly from the Fed through a program the central bank began after Bear Stearns imploded.

Finally, the government might not want to give investors the impression that it is the financial savior of troubled banks, analysts said. Instead, the feeling in Washington is that financial institutions will live or die by the free market.

Lehman Brothers – despite its tarnished image – has been one of Wall Street’s most respected franchises.

The company’s investment banking and trading operations routinely rank among the highest in the industry. For instance, Lehman Brothers is ranked eighth in the global mergers and acquisitions so far this year, advising on deals with a total value of $105 billion, according to financial data provider Dealogic.

Fuld said during a conference call Wednesday that the firm’s core businesses remains healthy.

Banks such as Bank of America may be interested in Lehman’s investment banking division.

With Bank of America, for example, a deal with Lehman Brothers would instantly catapult it to the top ranks of investment banking. For Barclays, buying Lehman would instantly boost its presence in the U.S. and give it a stronger position in stock and bond markets.

Whoever buys Lehman or its individual assets will have their own knot of problems to untangle, however.

“The damage is done,” Sabino said. “The house has been burned to the ground, now you’re just picking through the ashes.”Lehman shares fall further

NEW YORK (AP) – Lehman Brothers’ shares sank further on Friday as top executives raced to put a sale of the beleaguered investment bank in place and Washington indicated that taxpayers would not foot the bill.

Confidence has waned that Lehman Brothers Holdings Inc. will emerge from the financial crisis as an independent franchise, and the No. 4 U.S. investment bank is scouring Wall Street for a financial lifeline. Executives worked feverishly in the past two days to find someone willing to buy all or part of the company, bankers and industry executives close to the situation said.

Lehman shares fell 57 cents, or 13.5 percent, to cloe at $3.65. The stock is down nearly 95 percent from its 52-week high of $67.73 one year ago.

Bank of America Corp., Japan’s Nomura Securities, France’s BNP Paribas, Deutsche Bank AG and Britain’s Barclay’s Plc have been mentioned this week as potential buyers. All have declined to comment.

Treasury Secretary Henry Paulson is against any use of government money in whatever deal comes together for Lehman, a person close to his thinking said Friday.

The person, who spoke on condition of anonymity given the sensitivity of negotiations, said Paulson, who played a major role in engineering the government-back Bear Stearns bailout, believes the Lehman situation is different in two critical aspects.

Financial markets have been aware of Lehman’s troubles for a long time and have had time to prepare. And the Federal Reserve is now allowing investment banks to borrow directly from the Fed just as commercial banks can do. It opened the borrowing spigot for investment banks after the near collapse of Bear Stearns in March.

“Given those two things, he is adamant that there be no government money in the resolution of this situation,” the person said.

Taxpayer money may already be on the line for the government’s takeover of mortgage giants Fannie Mae and Freddie Mac and the government-brokered sale of investment bank Bear Stearns to JPMorgan Chase & Co. in March. The Federal Reserve put up $29 billion in loans to help that deal.

The final cost of both actions is impossible to know. It will depend on how much the U.S. economy weakens and how much the housing market sinks. One guess was made earlier this year by the Congressional Budget Office, which estimated that a rescue of Fannie and Freddie could cost taxpayers around $25 billion.

Some economists believe the government’s actions ultimately could be more costly to taxpayers than the savings and loan crisis, when the failure of more than 700 S&Ls in the 1980s and early 1990s cost taxpayers around $125 billion.

Without the government’s financial backing, there’s more pressure on Lehman Chief Executive Richard Fuld, who joined the company in 1961 as a college student and now serves as Wall Street’s longest-serving CEO. He has tenaciously resisted putting the company up for sale, but finally relented after a free-fall in its stock price and growing doubts about its survival, according to bankers and industry executives. They asked not to be named because they are not authorized to comment publicly.

Lehman’s losses soared to almost $7 billion in the last two quarters alone, primarily because of wrong-way bets on mortgage securities and other risky investments.

It’s not alone. Global banks have lost more than $300 billion since the subprime mortgage crisis spread to the credit markets one year ago. And the International Monetary Fund has suggested total losses globally could hit $1 trillion.

Lehman Brothers hunted for months for a deep-pocketed investor to pump fresh capital into the firm, a move that would help restore confidence and replenish its broken balance sheet. Some analysts said Lehman was asking too high a price, others guessed that potential investors found too much risk on its books in the current environment.

Fuld tried to assuage nervous investors on Wednesday by announcing a plan to sell a 55 percent stake in its prized investment management business and spin off its commercial real estate holdings into a publicly traded company.

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