Speculation over the future of Lehman has swung violently over the past week. After reporting its 3Q earnings numbers a week earlier than initially scheduled, fears seemed to settle as management seemed to have a firm plan for the future by cutting dividends and selling off its asset management and commercial real estate interests. However, after the initial relief this supplied, fears that the piece meal sale still put the overall firm at risk of collapse began to rise fears. Yesterday, rumors began to surface that the firm was once again looking for buyers for the entire firm. What’s more, talk began to circulate that the Treasury Department and Federal Reserve would facilitate a purchase with funds and help find a buyer (offer a sense of stabality to the whole deal). This morning, headlines suggest the opposite, that Treasury Secretary Paulson is adamently against putting up funds for another bank on the brink. On the other hand, there has been promising speculation that a consortium comprised of Bank of America, JC Flowers and China Investemt Corp. was mulling over a potential offer. All this speculation spells potential for a surprise outcome for the carry trade. Should a sale go through (and without government help), it would reflect well on the health of the financial market and carry trade. We have already seen the carry trade rebound significantly since yesterday.