Our guess of Lehman’s true net worth at the time it filed for bankruptcy is somewhere between –$100 billion and –$200 billion . . . In the end, it is this negative net worth and the Fed ’s unwillingness to lend more than the collateral it received that made it impossible to find a buyer for Lehman.

Questions of Lehman’s true liquidity were evident even in early 2008. Even worse, “what little collateral Lehman had to pledge was of questionable quality and scattered across many affiliated entities.”

But the proof of Lehman’s insolvency is found in its notorious accounting deception, Repo 105. Each quarter, Chief Executive Officer Dick Fuld and his team of accountants at Lehman managed to move about $50 billion in liabilities off of Lehman’s books just in time for the quarterly earnings report. As the Wall Street Journal reported, “Because no U.S. law firm would bless the transaction, Lehman got an opinion letter from London-based law firm Linklaters.”

Hiding $50 billion dollars or more of liabilities each quarter is evidence of capital inadequacy or excessive leverage, if not outright insolvency. See chapter 11 on the bankruptcy report on Lehman Brothers -- it details the firm's many follies, leaving no doubt that it was bust.

Lehman’s accounting was especially opaque, even relative to other investment banks (and that’s saying something!), making it difficult for any suitor to throw Lehman a lifeline, especially on such short notice.

But there was one white knight who could have saved Lehman: Warren Buffett, chairman of Berkshire Hathaway. This resolves the last issue of whether the firm could have raised capital independently. Professor Ball observes:

The Search for a Strategic Partner Between March and September, Lehman executives sought a strategic partner that would take an equity stake in the firm or buy it entirely. The Valukas Report (Appendix 13) lists more than thirty prospects that Lehman approached, including investment banks around the world, private equity firms, sovereign wealth funds, and Warren Buffett and Carlos Slim. Yet, after the June 12 stock issue, none of Lehman’s efforts to raise capital was successful.

This isn't quite correct: Berkshire Hathaway offered Lehman Brothers capital on terms that were more generous than the deal it would eventually offer (and be accepted by) Goldman Sachs. As I wrote in "Bailout Nation":

According to Bloomberg, Berkshire Hathaway offered to buy preferred shares that would pay a dividend of 9 percent and could be converted to common at the then- market price of $40.30. Buffett’s money was costlier than other potential investors, but it came with the imprimatur of the world’s best-loved investor. That alone probably would have guaranteed Lehman’s survival.

Part of Buffett’s offer was that Lehman Brothers senior managers invest on the same terms alongside him with their own cash. Fuld spurned that proposal.