This weekend saw an unprecedented shakeup on Wall Street, as attempts to save Lehman Brothers failed and Bank of America agreed to purchase Merrill Lynch. Uncertainty about the future of the credit crisis and the fate of major players like Washington Mutual and American Insurance Group (AIG) is still in doubt.
See who fared best and worst after Wall Street's tumultuous weekend...
Winner
Kenneth Lewis
Bank of America
Lewis's seven-year tenure at the helm of Bank of America has been marked by big, audacious, complicated acquisitions, but buying Merrill Lynch may top them all. Lewis's plan to buy Merrill for $50 billion cements his reputation as one of the most aggressive acquirers in corporate history, with well over $150 billion of acquisitions.
Bank of America was already the biggest U.S. retail bank, credit card issuer and home equity loan provider. Adding Merrill will make it the largest U.S. brokerage and add a far bigger investment bank and wealth manager through Merrill's nearly one-half stake in BlackRock.
Winner
David Einhorn
Greenlight Capital
The hedge fund manager, a well-known short seller, had said since early this year that Lehman had understated problems and needed to raise capital to support a balance sheet filled with risky assets. He presumably reaped major profits as the company's stock fell nearly to zero.
Winner
John Thain
Merrill Lynch
Thain's master stroke may prove to be agreeing to be wed before a shotgun was involved.
This is probably not the ending that Thain was reckoning on when he took the top job at the brokerage late last year, but it could have been much worse. Bank of America's $29 purchase price represents a 70 percent premium to Merrill's depressed closing price on Friday.
And the firm, widely seen as the next target of short-sellers, has at least avoided the inevitable questions about its survival that would have followed an expected bankruptcy filing by Lehman Brothers, with which it shared some of the same underlying problems.
Loser
Richard Fuld
Lehman Brothers
As the credit crisis worsened, Fuld was Wall Street's one seemingly teflon chief executive, keeping his job unchallenged even as CEOs fell at rivals like Bear, Merrill Lynch Cos Inc and Citigroup and as Fuld's own underlings including Chief Financial Officer Erin Callan were pushed out.
But eventually he was no match for the implosion of the mortgage boom on which he had staked the firm's fortunes. At key junctures Fuld seems to have played a game of brinksmanship, refusing to accept offers that could have rescued the firm because they didn't reflect the value he saw in the bank.
Based on $639 billion in assets at the time of filing, Lehman easily surpassed WorldCom as the largest U.S. bankruptcy ever. Lehman listed its biggest unsecured creditors as Citigroup, Bank of New York Mellon Corp,Aozora Bank, and Mizuho Financial Group. Citi and Bank of New York Mellon are trustees for Lehman bonds.
The investment bank's shares are now worth only pennies. Sellers of protection on Lehman Brothers debt may recover as little as 30 cents on the dollar, after payments on its credit default swaps were triggered by its bankruptcy. Lehman's bonds plunged over the weekend as the bankruptcy filing became more likely, with its debt on Monday in many cases trading in the 30-to-35 cents on the dollar range, according to MarketAxess.
Tim Backshall, chief strategist at Credit Derivatives Research, estimates that Lehman's senior unsecured debt may recover in the region of 40 cents on the dollar, with its subordinated debt likely to be wiped out.
For many of Lehman's 26,000 employees the outlook is likely to be gloomy, with job losses expected to be substantial even if significant parts of the business can be sold.
Although the firm has been saved with the Bank of America acquisition, the deal could put about 24,000 of Merrill's 60,000 non-broker employees out of work, estimated Gustavo Dolfino, president at New York-based recruiting firm WhiteRock.
