By Emily Chasan

"We would like to be out of this situation with in 18 to 24 months," Bryan Marsal, the co-founder of turnaround firm Alvarez & Marsal and current chief executive of Lehman, said at a bankruptcy court hearing in Manhattan.

"Too many people are saying this case is going to take five to six or 10 years. There's no reason for this thing to be in bankruptcy for that amount of time," Marsal said.

Marsal has been heading a team of more than 500 to wind down operations at Lehman and said he believes the situation there is now "stable," compared with the chaos that occurred at the 150-year-old firm when it filed for bankruptcy on September 15.

But U.S. bankruptcy Judge James Peck, who also on Wednesday approved the appointment of an examiner to probe the investment bank's collapse, warned that Lehman would have to think globally to meet such a speedy timeline.

Peck said that, with dozens of insolvency proceedings pending around the world, the Lehman case is "undoubtedly the most massive cross-border insolvency in the history of the world," and told lawyers they should work out protocols for global issues and creditor claims to be resolved efficiently.

"I am concerned that, absent some ability to tie together all of these (international) estates, that we run the risk of a 'mouse that roared' problem in which some estate in some other jurisdiction may control the timing of the exit in this case," Peck said.

Lehman's bankruptcy attorney, Harvey Miller, said at the hearing that the firm has been working closely with the Lehman Brothers unit in Europe and its administrators.

RESOLVING ISSUES

Marsal took over as Lehman CEO this month after serving as the firm's chief restructuring officer for months.

As part of a status update to the court, Marsal said that, after sales of Lehman's core U.S. brokerage unit, money manager Neuberger Berman, and several other assets, the company is focused on an orderly wind-down.

Marsal said Lehman had a cash balance of about $6 billion as of January 2, compared with about $3.3 billion on September 14, the day before it filed for bankruptcy protection.

Marsal said Lehman is working to maximize the recovery value of the firm's assets, by resolving its derivatives book, other claims and funding commitments, and looking to sell hard assets such as real estate, art and Lehman's fleet of planes.

PROBING THE COLLAPSE

Judge Peck also approved a request to appoint an examiner to probe Lehman's collapse.

The U.S. Trustee's office, which oversees bankruptcy cases in New York, has already interviewed several candidates for the job, U.S. Trustee Diana Adams said at the hearing.

According to U.S. bankruptcy laws an examiner can be appointed in any bankruptcy case if someone requests it and the court finds the company's debts exceed $5 million.

When Lehman filed for bankruptcy, it listed $613 billion in debts and $639 billion in assets.

The examiner is expected to produce a report on the issues surrounding how Lehman collapsed; how it pursued the sale of key assets such as its core U.S. brokerage business to Barclays Plc ; and look for any evidence of fraud, dishonesty, or misconduct, lawyers said at the hearing.

"The examiner has to be someone who is fiercely independent, of the highest integrity and not afraid to take on anyone, including the Federal Reserve," Marsal said. "It has to be a process where everyone can be examined."

Lawyers representing Lehman, its creditors, the U.S. Trustee's office and other parties are expected to meet over the next few days to work out details relating to the scope of the examiner's investigation.

"We will support the examiner, we want transparency," Miller said at the hearing.

(Editing by Matthew Lewis and Andre Grenon)