I work in the financial services industry - as someone at the bottom of the food chain - but this weekend is going to go down in the books as unlike anything else the financial services industry has seen in a while. I never bought any of the pooh-poohing BS that was being floated about a collapse by Lehman Brothers being any different than that of Bear Stearns; it was clear that the firm was in trouble and wasn't going to survive. The fact that neither Bank of America or Barclays stepped up to the plate gives you an idea of how problematic the assets Lehman is carrying are. Dick Fuld, the soon-to-be last CEO of the firm, is going to take a huge hit to any legacy he has because of his stubbornness in dealing with Lehman's problems. In the end, he fired just about everyone but himself - but it didn't save the firm.
More intriguingly, out of the blue today, Merrill Lynch appears set to sell itself to BoA. I'm a bit surprised at the kind of premium Merrill is being valued at...its stock closed just above $17, and BoA is offering $29/share in an all-stock transaction? I think that's a bit optimistic of a valuation, considering how many losses Merrill has had to absorb in the past year - and how much it probably has left on its books.
That means that the #3, 4, and 5 investment banks in the country will have ceased to exist in a matter of 6 months, leaving Goldman Sachs and Morgan Stanley as the last investment banks standing at the top. You'll also have 3 gigantic players in the one-stop financial services field - BoA, with Lehman's investment banking operations, will finally be able to compete on the same level as Citigroup and JPMorgan Chase.
Hopefully, that will be the end of any more realignment in the sector...but I wouldn't count on it.
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