There were as many chauffeurs outside the New York Federal Reserve Bank over the weekend as there were bankers inside. Parked near the New York Fed building in Manhattan, two blocks from Wall Street, black saloons waited for the return of passengers who, between them, held the future of Lehman Brothers in their hands.

Henry Paulson, the US Treasury Secretary, Christopher Cox, chairman of the Securities and Exchange Commission, and Timothy Geithner, president of the New York Fed, had summoned the heads of every leading bank asking for an injection of $35 billion (£19.5 billion) to prop up Lehman.

Clad in weekend wear of chinos and open-necked shirts, the bankers — John Mack, chief executive of Morgan Stanley; John Thain, head of Merrill Lynch; Vikram Pandit, chief executive of Citigroup; Lloyd Blankfein, of Goldman; and Jamie Dimon, head of JPMorgan Chase — came to discuss underwriting $85 billion of Lehman's most toxic assets, ring-fencing the danger to prevent a firesale.

The plan envisaged either Barclays or Bank of America buying the remaining attractive asset — the investment bank. The carve-up, devised by Mr Paulson, was designed to avoid Lehman's real estate assets being sold cheaply in a valuation that would have severe implications for the value of similar assets held by other Wall Street banks — in particular, Merrill Lynch.

One banker whose chief executive attended the summit said: “None of us have been let off. We were all there yesterday and we're all there today.”

While Lehman has long been identified as the most vulnerable of Wall Street banks because it has the biggest exposure to mortgage-backed securities, Dick Fuld, its chairman and chief executive, had spent much of this year trying to convince shareholders and Wall Street that all was well.

Since the collapse of Bear Stearns in February, Mr Fuld has regularly phoned other banks, accusing their trading staff of trying to trash the reputation of his bank and drive the stock down. He told them bluntly that speculation about the bank facing funding problems was “ludicrous”. He also made repeated public reassurances about the bank's liquidity.

But last week Mr Fuld's luck ran out. On Monday and Tuesday, shares in the bank, down 90 per cent over the year, sank another 47 per cent. Wall Street believed that Lehman could no longer survive.

Mr Fuld brought forward the bank's third-quarter results by a week and tried to convince analysts at a conference call that, despite another $3.9 billion assets writedown, a $2 billion quarterly loss and a twofold asset sale, he could pull it off. They did not believe him.

Concerned that Mr Fuld had failed to name and secure a buyer for Neuberger Berman, the bank's lucrative asset management business, which is possibly worth $10 billion, and dubious about his plans to ringfence Lehman's $30 billion of toxic commercial real estate investments by floating them off, the shares slipped further.

One banker told The Times: “On that conference call, his voice was broken. I have never heard him like that. He spoke by rote.”

By Thursday Mr Fuld who, ironically, sits on the board of the New York Fed, which is trying to secure a rescue plan, tried to sell his bank. It is not known how many were tempted, but a consortium of Bank of America, JC Flowers, the private equity group, and China Investment Co, the sovereign wealth fund, emerged as an interested party. Goldman Sachs looked favourably on the commercial real estate assets. John Varley, chief executive of Barclays, and Bob Diamond, chief executive of Barclays' investment business, were also interested in buying - what was believed to be the investment bank of Lehman.

As the New York market closed on Friday, Mr Paulson started the countdown. According to one source close to a potential bidder, Mr Paulson concluded that Lehman should not be allowed to remain in its existing form when the markets opened today. The source told The Times: “Mr Paulson was anxious that should a deal, or a number of transactions, not be secured by Sunday evening, the uncertainty about Lehman, its clients and their exposure, could trigger panic as Japanese traders arrived for work in Tokyo.”

A banker close to the talks said: “It is a very narrow window. Paulson is aiming for Sunday night, but they may not hit that target. There is an enormous amount of due diligence to do before you can get a signature on that contract.”

The Saturday marathon ended in stalemate. Mr Paulson and Mr Geithner had wanted to split Lehman into two or three companies - one containing Lehman's bad assets, including its $85 billion of real estate, one housing the investment bank, and Neuberger Berman. Faced with insistence from the Federal Reserve and the Treasury that they would not use taxpayer funds to bail out Lehman, many bidders were unwilling to commit.

As the future of Lehman hung in the balance, traders at other US banks were trying to calculate their exposure in the event of collapse. Their predicament was far less harrowing than that of Lehman's workers. “Nobody knows whether to bother turning up for work on Monday or not,” one said.

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