The landscape of Wall Street and the wealth management industry were dramatically reshaped just since the close of business Friday and the markets are getting set for a tumultuous opening Monday.

Regulators from the Federal Reserve and U.S. Treasury Department called together the heads of the biggest financial companies over the weekend to try to staunch the bloodletting on Wall Street. In efforts to save two of the industry's titans, they won one and lost one. And a third is starting to stagger. Lehman Brothers said it would be filing for bankruptcy protection while Merrill Lynch was bought by Bank of America in a $50 billion stock transaction. Meanwhile, all eyes were also on AIG, which was seeking a $40 billion bridge loan from the Federal Reserve.

And, the problems don't end there. Washington Mutual, whose misfortunes are tied to the housing crisis, is being watched as well.

Going into the weekend the biggest worry was Lehman Brothers. With $613 billion in debt, and a balance sheet that is interwoven with other banks in the global marketplace, the mounting worry was that a Lehman failure would cause a major ripple effect throughout the industry.

What emerged over the two days as the other big story, and in the wealth management industry a bigger one, was the trouble at Merrill Lynch. After $45 billion in writedowns over the past couple of years stemming from woes in the mortgage market, and several attempts to find new cash infusions earlier this year, the company found itself unable to continue on its own. Merrill share price closed at $17.05 on Friday and during the last 52 weeks was as high as $78.66. Merrill was bought by Bank of America over the weekend for $50 billion in stock.

However, Danny Sarch, president of White Plains, N.Y.-based executive search firm Leitner Sarch, has been taking calls from advisors at Merrill and Lehman all weekend.
"Here's the fiercest independent, strongest culture on Wall Street," he said of Merrill Lynch. "It's chaotic."

To be sure, Merrill has more stability than it did a couple weeks ago, but if the merging companies are under the impression that this will at all be an easy merger, Sarch warns them to rethink their opinions.

Bank of America did not have a large presence in wealth management, but Sarch says that those opposite businesses may not necessarily mesh into a cohesive whole, he says. "Citi bought Smith Barney 10 years ago now, and they still don't have it quite right," Sarch says.

He adds that people are waiting to hear about the retention packages, but since Bank of America paid a premium on the stock for Merrill, the packages could be small, says. But, that's purely a guess, he says.

Lehman is even more chaotic, he says. "Nobody knows what's going on."

Another Wall Street recruiter says: "Merrill brokers are not jumping ship yet. It's wait and see." Over at Lehman, though, "it's wild," the recruiter says.

Lehman, whose share price plunged to $3.65 by Friday's close had been as high as $67.73 over the past year. But it was unable to drum up any interest from potential suitors over the weekend, and consequently it, reportedly, plans to file for bankruptcy protection.

Lehman was initially talking to Bank of America itself, as well as Barclays, about a possible deal. But those talks fell apart as it become more apparent that the Fed and Treasury were not interested in using public money to help facilitate any deals.

Lehman said that its subsidiaries, including its broker dealer, would not be part of its bankruptcy filing. Those subsidiaries will continue to operate while the company continues to try to sell them.

The Securities and Exchange Commission announced that it would be working with Lehman to ensure the broker-dealer unit will not be adversely affected. Safeguards are in place, including the Securities Investor Protection Corp., to help keep investors safe in this type of situation.

The government took a tougher stance in these talks than it did in the shotgun marriage of Bear Stearns and JPMorgan Chase a few months ago, which was aided with $30 billion in public money; or in the bailout of Freddie Mac and Fannie Mae even more recently, which took $200 billion.

Merrill, the largest brokerage and arguably the best-known company on Wall Street, will be gone once the sale is final. Its name will live on, as the newly combined entity with Bank of America's much smaller brokerage unit will be called Merrill Lynch Wealth Management.