Merrill Lynch Sell Itself to Bank of America for $50 Billion to Avert Financial Crisis; Lehman Can't Find Buyer; AIG Next?

Wall Street giant Merrill Lynch is selling itself to Bank of America for about $50 billion to avoid a financial crisis, as Lehman Brothers faces liquidation after it failed to find a buyer, The New York Times' Jenny Anderson, Eric Dash and Andrew Ross Sorkin reported in a story that carried Sorkin's byline late Sunday night. The developments capped a frantic Sunday for the investment firms.

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.

But even as the fates of Lehman and Merrill hung in the balance Sunday night, another crisis loomed as the insurance giant American International Group appeared to teeter. A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company may have only days to survive.

The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.

“My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen,” said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration.

The Washington Post reported the Merrill sale at $44 billion. Rick Rothacker and Christina Rexrode of the Charlotte Observer report that it was the best move for Bank of America, which is based in that North Carolina city:

James Early, an analyst at The Motley Fool, called Merrill a “less surprising” merger partner than Lehman, because of Merrill's recent management shakeup and its relative strength.

“Bear Stearns was a deathbed company, Lehman was an almost deathbed company, Merrill is just a sick company,” said Early. “And that is probably an easier sell to Bank of America shareholders.”