BARCLAYS is considering taking part in a “club rescue” of Lehman Brothers, the stricken American investment bank.

The group has held tentative talks with Bank of America and other institutions about joining forces but all options are being examined as well as a solo bid.

US Treasury secretary Hank Paulson was locked in talks with the heads of all the big Wall Street banks yesterday afternoon in an effort to secure a deal. One option could be to arrange a mass bail-out involving all of the banks, modelled on the bail-out of Long-Term Capital Management in 1998.

The board of Barclays is on emergency standby as its key executives examine a possible rescue. The head of Barclays Capital, Bob Diamond, and his key lieutenant Jerry del Missier, are in New York this weekend studying Lehman’s finances to determine which parts of the business they might want to buy.

Barclays has called in Deutsche to help assess the situation, one of its core advisers on the ABN Amro takeover battle last year.

If Diamond believes a deal is viable, he will make a detailed proposal to his board. Marcus Agius, the chairman, and John Varley, chief executive, are in constant touch.

Barclays’ key investors, Temasek of Singapore and China Development Bank, have shown willingness to back a deal that would put Barclays in the top tier of financial institutions. But the Chinese state has not sanctioned any of its investment funds to get involved in a Lehman transaction, according to Wall Street sources.

Those close to Barclays say the bank could easily walk away. If the framework of a rescue is not in place by the time the American market opens tomorrow, it could be too late. Bank of America is interested in leading a bid and has lined up partners that include China Investment Corporation, the sovereign wealth fund.

Bank of America is also believed to be keen on a possible deal with Merrill Lynch, the American investment house that is widely expected to need further injections of capital to see it through the credit crisis.

Barclays could join this club and is thought to be keen to buy the fixed-income and advisory business. Varley has harboured a long ambition to make Barclays big on Wall Street.

According to those close to the situation, Barclays and Bank of America are only prepared to table a deal if Treasury secretary Paulson is prepared to underwrite some of the risk with public funds – the safety net he put in place when JP Morgan bailed out Bear Stearns.

Paulson is known to be reluctant to offer support, and wants Wall Street’s big banks to resolve their own problems. Timothy Geithner, president of the New York Federal Reserve Bank, hammered this home at a meeting of the top Wall Street bank executives on Friday night.

Some of the positions Lehman is exposed to are highly illiquid and the US Treasury does not want to write an open cheque. If these positions unravelled, Lehman shares could be worthless. However, bankers believe that Paulson may need to provide limited support to any buyer of Lehman to push a deal through.

Richard Bove, an analyst at Ladenburg Thalmann, said: “If a deal is not done, Lehman will go bankrupt and the Treasury will have to step in.”

Another banker said: “I would be very surprised if Lehman is around by next weekend. It is the counterparty risk that is spooking Wall Street.”

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