All seven investment banks that had been in the running to handle Argentina's controversial debt restructuring have dropped out over disagreements over fees they wanted to charge the government, a source close to the transaction said.
"Everybody is out," said the source, who asked not to be named. "The government did not want to pay the banks as much as they wanted."
Another source with knowledge of the negotiations said the situation remained fluid and could change.
Argentina staged the biggest sovereign debt default in history about two years ago, dropping payments on $88 billion in bonds.
The government wants to pay back 25 cents for every dollar it owes while bondholders say they need at least 65 cents on the dollar in order to participate in the restructuring.
"All the banks wanted to make clear that this was the government's proposal and not the banks' proposal," one of the sources said.
Argentine President Nestor Kirchner is unpopular on Wall Street for his refusal to soften his proposal. His stance has strained the country's relationship not only with bondholders but with the International Monetary Fund, which has, however, continued to lend to the once-prosperous nation.
"Now Argentina will either call a meeting to ask the banks what the government needs to do in order to get the bidding back on track, or they will use only one bank as an agent while the government itself manages the transaction," one of the sources said.

This week La Nacion newspaper in Argentina said Goldman Sachs and Morgan Stanley had withdrawn from the bidding, leaving ABN Amro, Barclays, UBS, Dresdner Kleinwort Wasserstein, a unit of Dresdner Bank and Lehman Brothers.
Argentina's private creditors, which include New York fund managers and small retail investors in Europe and Asia, generally believe that a big investment bank will be needed to help Argentina distribute the bonds that are to be issued in the restructuring.