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As Merrill Lynch falls, an era ends

Merrill Lynch has been long seen as the brokerage firm that brought Wall Street to Main Street.

As another venerable Wall Street firm hurtled toward bankruptcy on Sunday, Merrill, its own options dwindling, prepared to sell itself to one of the nation's largest banks.

It is a remarkable fall from grace for the 94-year-old Merrill, whose corporate logo — a bull — has long symbolized the fundamental optimism of Wall Street. But after a frantic weekend of talks between Wall Street executives and federal officials over the fate of the teetering Lehman Brothers, fear spread Sunday that Merrill, staggered by losses, might also falter. The firm has agreed to sell itself to Bank of America for $50.3-billion in stock, according to people briefed on the negotiations.

"It is an enormous shock," said Steve Fraser, a Wall Street historian and author of Wall Street: America's Dream Palace.

"Merrill was a kind of bedrock institution whose stability and longevity was taken for granted and was reassuring to people," Fraser said. "Even in these very highly erratic and speculative marketplaces like we've been living through, you didn't think Merrill would be vulnerable."

The sale, if completed, would open a new chapter for Merrill, which was founded in 1914 and promoted the idea that anyone, not just the rich, should invest in markets. Merrill's brokers would be combined with Bank of America's smaller group of wealth advisers into an entity called Merrill Lynch Wealth Management, these people said. Customers with brokerage accounts at Merrill are unlikely to be financially affected.

Merrill, the nation's largest brokerage firm, was one of the earliest Wall Street firms to go public, in 1971. Its executives, traditionally former stock brokers, have long been viewed as spokespeople for the entire industry. After the crash of 1987, for instance, Merrill's chief executive appeared on a television commercial and used one of the company's longtime slogans, saying: "Merrill Lynch is still bullish on America."

John A. Thain, Merrill's chairman and chief executive, was brought in last December to try to salvage the troubled company. It remains unclear how many Merrill employees will be hired by Bank of America.

Since the credit crisis first flared more than a year ago, Merrill has been among the most wounded. Under its previous chief executive, E. Stanley O'Neal, Merrill moved aggressively into the mortgage market and became one of the top issuers of investment vehicles linked to subprime mortgages and other risky forms of debt. O'Neal was forced out last fall after the tumult in the mortgage market began.

Since then, the investment bank has taken more than $45-billion in writedowns, a figure that is two times more than all the profit Merrill made in the two and a half years before the credit crisis. The charges have pushed Merrill Lynch deep into the red and forced the company to lay off 4,000 workers. Merrill has raised more than $15-billion in additional capital to strengthen its financial position but has struggled to regain investors' confidence.

Employees reached Sunday night reacted with dismay and said they would consider leaving after Bank of America took over. Many said they were saddened that Merrill, which has long prided itself on its independence, would now become part of a larger commercial bank.

"A hundred guys flew this firm into a mountain," said a broker who works for Merrill in California and asked to remain anonymous because he did not have permission to speak with reporters. "It's really sad. Now we're going to be a bank like everyone else."

As Merrill Lynch falls, an era ends 09/14/08 [Last modified: Tuesday, November 2, 2010 5:05pm]
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