Paulson: ‘Never once’ thought about U.S. aid for Lehman

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No really did mean no.

Treasury Secretary Henry M. Paulson told reporters today that he ‘never once considered it appropriate to put taxpayer money on the line’ to save Lehman Bros. Holdings Inc.

Over the weekend, Bank of America Corp. and Barclays reportedly had been willing to consider bids for failing Lehman if federal aid was provided to backstop a purchase -- similar to what the Federal Reserve anted-up to persuade JPMorgan Chase & Co. to buy crippled Bear Stearns Cos. in March.

But one week after Paulson committed up to $200 billion of taxpayers’ funds to keep mortgage giants Fannie Mae and Freddie Mac solvent, he made clear that he wasn’t going there for Lehman.

‘Moral hazard is something I don’t take lightly,’ Paulson said, referring to the potential for government bailouts to encourage companies and investors to believe there’s no penalty for taking excessive risks.

Lehman filed for bankruptcy protection today. Its stock was last trading at 18.5 cents a share, down from $3.65 on Friday.

As for the next shoe that Wall Street fears will drop -- insurance titan American International Group -- Paulson said a meeting today in New York between AIG executives and Treasury and Fed officials wasn’t about federal financial assistance.

The rumor last night was that AIG wanted a $40-billion ‘bridge’ loan from the Fed to help shore up the company’s capital and avoid a possible credit-rating downgrade.

‘What is going on right now in New York has got nothing to do with any bridge loan from the government,’ Paulson said. ‘What’s going on in New York is a private sector effort, again, focused on dealing with an important issue that’s, I think, important for the financial system to work on right now.’

AIG shares plunged as low as $3.50 this morning but at about noon PDT were off $6.71 to $5.43.