Lehman shares slide on Paulson bailout reluctance

* BofA considered most likely buyer

* Talks with govt may be completed this weekend -- source

* Paulson adamant no government money be used -- source

* Lehman shares fall 19 percent; Merrill, AIG also hit

(Updates share prices)

By Christian Plumb and David Lawder

NEW YORK/WASHINGTON (Reuters) - Concern that Lehman Brothers Holdings Inc may fail to find a buyer because the U.S. government is reluctant to provide financial backing sent the firm's shares down to a 14-year low on Friday.

Lehman's bonds also dropped ahead of what is expected to be a series of frantic calls this weekend between Lehman, U.S. regulators and potential bidders. Bank of America Corp (BAC.N) is widely seen as a leading contender, with British bank Barclays Plc (BARC.L) also considered a possibility.

The Financial Times reported that BofA, the No. 2 U.S. bank by assets, was considering a joint bid for Lehman along with private equity investor JC Flowers and sovereign wealth fund China Investment Co. Lehman declined to comment.

Lehman LEH.N shares, the most traded on the New York Stock Exchange, were down as much as 19 percent in afternoon trading.

"I think they're going to have to draw a line at some point," Rose Grant, managing director of Eastern Investment Advisors in Boston said of Washington regulators. "This could be the point."

The credit maelstrom is threatening other financial companies, including leading brokerage Merrill Lynch & Co Inc MER.N and American International Group Inc (AIG.N), once the world's largest insurer by market capitalization. AIG lost as much as a third of its value, while Merrill slid 11 percent.

Credit protection costs also rose for AIG, Lehman and JPMorgan Chase & Co (JPM.N), with investors paying $715,000 to protect $10 million of Lehman debt, and $1.2 million to protect the same amount of AIG debt.

Lehman's 6.875 percent notes due in 2018 fell to 83.5 cents on the dollar, down from 84 cents at Thursday's close.

WORKING THE DEAL

Adding doubts about the possibility of a quick rescue for Lehman, a source familiar with U.S. Treasury Secretary Henry Paulson's thinking said he was "adamant" that no government money be used in any deal.