Looking to cut off speculation that any sale of floundering Lehman Brothers Holdings Corp. (LEH) might need to involve federal dollars, Treasury secretary Henry Paulson on Friday was reportedly adamant that any effort to sell the Wall Street investment bank not use government funds. HW reported on the latest round of troubles and potential purchase rumors involving Lehman on Thursday, which suggested that Bank of America Corp. (BAC) sat at the top of a short list of suitors for the firm; but at the time, sources were suggesting that BofA and other potential purchasers were demanding federal involvement a la the Bear Stearns & Co. bailout by JP Morgan Chase & Co. (JPM). According to a Reuters report citing a person close to Paulson, the Treasury chief no longer sees a need for Lehman to rely on Federal funding for a bailout — unlike Bear Stearns, Lehman has access to the Fed’s Primary Dealer Credit Facility, or PDCF. The program was put into place after the Bear Stearns failure to allow Wall Street banks to have access to funds in the event of a collapse in stock prices, giving Lehman time to search for a longer-term solution. The longer it relies on the PDCF, however, the more likely speculation will mount that a Federal takeover is imminent. And therein lies the rub. Earlier in the week, Lehman moved up its third quarter earnings announcement in an attempt to assuage investor unease. The firm said that it expects to lose $3.9 billion in the third quarter, a loss of $5.92 per share, the largest quarterly loss in company history. Driving the loss are $5.6 billion in net write-downs on residential mortgage and commercial real estate positions. Bank of America Corp. (BAC), fresh off its acquisition of Countrywide Financial, remains at the forefront considering a joint bid for the company with J.C. Flowers & Co., according to the Financial Times, which cited unidentified sources. While BofA and other suitors may be looking at bidding on the whole company, Bloomberg reported late Friday that Lehman’s asset-management unit had received bids from various private-equity firms including Bain Capital LLC and Clayton Dubilier & Rice Inc., citing sources close to the company. The bids valued the Lehman unit at about $5 billion, Bloomberg reported. Lehman had announced earlier that it intended to obtain bids for its asset-management business. Disclosure: The author held no relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.