Barclays PLC asked the Federal Reserve whether the U.S. government would guarantee liabilities the U.K. bank had to assume when it bought the brokerage of the bankrupt Lehman Brothers Holdings Inc., a lawyer on the deal said.
The U.S. said no aid would be available, Victor Lewkow, who represented Barclays in the Lehman transaction, testified Tuesday in U.S. Bankruptcy Court in Manhattan. The Fed told Barclays there would be no repeat of the government's guarantee of liabilities "as an incentive" to JPMorgan Chase & Co. to buy Bear Stearns Cos., Lewkow said.
"The government guaranteed a whole series of contingent liabilities, limiting JPMorgan's liabilities," Lewkow said. "It was made clear that would not be repeated." Barclays did borrow from the Fed while arranging the purchase, he said.
Barclays bought the brokerage business in September 2008, a week after Lehman filed for bankruptcy. Lewkow, a partner at Cleary Gottlieb Steen & Hamilton LLP, was called to testify in a trial to determine whether Barclays should pay Lehman as much as $11 billion for making an allegedly undisclosed windfall on the purchase.