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It has been less than a week since the Fed announced Fannie Mae (FNM) and Freddie Mac's (FRE) major bailout. Now officials are busy again trying to salvage Lehman Brothers’ (LEH) sinking ship. According to Dealbreaker, which broke the news - the New York Federal Reserve and Treasury are scrambling to find a buyer for the New York-based investment firm.

The situation deteriorated further yesterday, after Moody’s Investors Service said the company must find a stronger financial partner. Lehman has been actively shopping itself to potential suitors, including Bank of America (NYSE:BAC), but potential buyers remain wary about plugging holes in Lehman’s balance sheet, and are increasingly looking to the U.S. government to help backstop future losses. Needless to say the firm’s financial conditions are dire.

On Tuesday, Lehman’s shares fell nearly 50% on news that the Korea Development Bank [KDB] wasn’t interested in a deal, and on Thursday, Lehman shares again came under renewed selling pressure and were trading almost 42% lower. In addition, several financial companies are now avoiding doing business with the firm threatening a replay of what happened to Bear Stearns (NYSE:BSC).

Sometimes the obvious doesn’t take very long, which is why the regulators have intervened. According to Bloomberg, the Treasury and the Fed are working together with Lehman on a sale involving several solutions. One possible scenario may be that of allowing multiple suitors acquiring different pieces of the oldest major firm on Wall Street. Another scenario would be to have the government wave restrictions that have prevented private equity buyers from buying the investment bank, which has suffered huge losses from its business in real estate and mortgages.

In a report on Thursday, Merrill Lynch & Co. analyst, Guy Moszkowski said:

While the number of potential acquirers at this point is very few, Moody’s action certainly raises the specter of takeout, potentially at a very low price.

The situation remains still fluid. The regulators are not giving any guarantees, but are hoping a deal will be in place this weekend before the Asian markets open Sept 15.

Shares of Lehman were downgraded on Thursday by several Wall Street firms. LEH shares fell $3.03 (41.79%) during Thursday’s session to $4.22 in NYSE composite trading.

Disclosure: None

Source: Is the U.S. Government Scrambling to Find a Buyer for Lehman Brothers?