It quoted one person close to the firm as saying that if such an event occurred, AIG may survive for only 48 hours to 72 hours.
As the crisis intensified, Mayor Michael Bloomberg, himself a billionaire, cancelled his visit to California to meet governor Arnold Schwarzenegger and instead was talking to officials and experts to determine the impact of the developments on the city.
Though the government took control of troubled mortgage finance companies Fannie and Freddie a week ago, the Times said investors have become increasingly nervous about whether major financial institutions can recover from their losses.
Lehman's filing is unlikely to resemble those of other companies that seek bankruptcy protection. Because of the harsher treatment that Federal bankruptcy law applies to financial-services firms, the Times said Lehman cannot hope to re-organise and survive.
It was not clear whether the government would appoint a trustee to supervise Lehman's liquidation or how big the financial backstop would be.
Image: Richard Fuld, Chairman and CEO of Lehman Brothers | Photograph: Mandel Ngan/AFP/Getty Images
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