CNBC reports that Merrill Lynch sent 500 people packing today, and a total of 10,000 people may ultimately lose their jobs after the firm merges with Bank of America. [Clusterstock]

Bill O'Reilly cares really, really deeply about the little people, especially the unfortunate folks who have lost their homes during the mortgage meltdown. That's why he says he now plans to track down the perpetrators of these outrageous crimes "one by one." Last night's target: Former Merrill Lynch CEO Stan O'Neal, who was evidently leaving his apartment building on Park Avenue when an O'Reilly operative ambushed him and trailed him a few blocks, all the while asking him questions about the $161 million he made last year and whether or not he felt bad for Merrill investors and employees. O'Neal kept his mouth shut the entire time, which didn't exactly make for thrilling television. Hopefully the lack of drama won't deter O'Reilly hooligans from camping outside Dick Fuld's house in Greenwich or bumrushing Jimmy Cayne at his weekly bridge game.

♦ Lawmakers and officials are moving close to ironing out a second stimulus bill after Fed chair Ben Bernanke endorsed the idea. [Bloomberg, NYT]
♦ The Treasury Department is pushing bigger banks to use the rescue package to acquire smaller, weaker rivals. [NYT]
♦ The Dow's 413-point rise yesterday was attributed to signs the credit market is beginning to thaw. [NYT]
♦ Some people are still making out nicely: Peter Kraus, the head of strategy at Merrill, will be leaving the firm after just a couple of months with as much as $25 million. [WSJ]

♦ John Thain says he expects "thousands" of job cuts will follow Merrill Lynch's merger with Bank of America. [Bloomberg]
♦ Another day, another bailout: The Netherlands will inject $13.4 billion into ING. [WSJ]
♦ GM is having difficulty acquiring Chrysler because it can't come up with the financing. [WSJ]

The Hong Kong-based clothing retailer Giordano International—"the Gap of Asia"—has a new line of crisis-themed t-shirts planned for Halloween. Think it's in poor taste? Not at all. It's supposedly designed to cheer you up. "Giordano has chosen a brainy way to lift spirits with 'Halloween HalloTees' that are equally stylish, casual and spooky," the company said in an official statement.

♦ The Dow's huge drop yesterday led to an massive sell-off overnight in Asia. What will happen today is anybody's guess. [Marketwatch]
♦ Citigroup reported a $2.8 billion loss for the third quarter. [WSJ]
♦ Merrill Lynch did even worse, reporting $5.2 billion in losses for the quarter. [Bloomberg]

♦ Now comes the hard part. After winning the vote in the Senate last night, the bailout bill will head to the House for a Friday vote. [NYT, WSJ]
♦ John Thain will be staying put at Bank of America, contrary to initial rumors. He'll become the combined company's president of global banking, securities and wealth management. Who wants to hunt for a job in this economy? [MW]
♦ "Warren Buffett has become the new triple-A credit rating system." [NYT]
♦ Dick Fuld's last day in his corner office may come tomorrow. [WSJ]
♦ First-time applications for unemployment benefits rose to the highest level in seven years. [Bloomberg]

How's this for depressing: You can still watch enthusiastic recruiting videos for both Lehman Brothers (here) and Merrill Lynch (here) online. [Via VSL]

Lehman Brothers gave $39 million to charity last year; Merrill Lynch handed out $43.7 million in 2007. So it's not surprising that charities in the city are now wondering how they're going to make ends meet. [Forbes]

Well look, the market is up again, how (pardon me) UTTERLY FUCKING RETARDED. What this means: another huge plunge is invariably in sight! Because the government achieved this by outlawing short-selling temporarily on all the big stocks you'd want to short, and what the hell are hedge funds supposed to do about that? Gawker tipsters all over financeland are predicting a protracted bloodbath over the next couple months as investors sign up to get their money out of hedge funds. Dozens could go bust. But hey, here is a silver lining: hedge funds are for rich people! (Well, not anymore, now that America is running the world's biggest hedge fund with our tax dollars.) But hedge funds used to be for only the rich, and with your help we can illustrate how rich people are stupid. Inspired by this story about an insane Merrill Lynch investment vehicle called NORMA one expert quoted in the Wall Street Journal called "a tangled hairball of risk", I'm holding the Awful Vodkas I Have Drank of the plutocracy, an "Absurd Financial Product Some Rich Person Actually Bought" contest. I asked one of our tipstering financiers about the most retarded investment vehicle he'd ever seen.

If you're looking for some reassurance during these rocky times when Wall Street firms are going bankrupt, laying off thousands, and entering into last-minute mergers, perhaps this 30-second commercial from the last recession will put those worries to bed. "In the midst of the storm, it's only natural to wonder where the future will lead," the spot stars off before adding that "no adversity lasts forever." So true, so true.

♦ Fearing another massive corporate bankruptcy, the Federal Reserve agreed to an $85 billion bailout of the troubled insurance giant AIG. [NYT, WSJ, Fortune, NYP]
♦ AIG's CEO, Robert Willumstad, will be replaced by Edward Liddy, the former CEO of Allstate. [Marketwatch]
♦ AIG's ex-CEO Hank Greenberg is dismayed he wasn't involved in the bailout effort. Considering he's tangled up in about half a dozen lawsuits with his former company, that wasn't so surprising. [WSJ]
♦ Concern now seems to be focused on Washington Mutual: Federal officials have contacted Wells Fargo, JPMorgan, and HSBC to gauge their interest in a possible acquisition of WaMu. [NYP]
♦ John Thain and two of his deputies stand to make $200 million for the year they've spent at Merrill. [Bloomberg]

Ha ha ha just months ago the stupid business press were writing glowing cover stories of Merrill Lynch CEO John Thain like he was John McCain in 2000 and now look his company doesn't exist anymore! Yes we've received those tips. "Aside from its obvious troubles-afflicting all the largest financial institutions," Forbes wrote, "Merrill is in damn good shape." Interesting word choice, media! Distracted by a certain someone's athletic physique?Oh but wait, everyone still hearts John Thain. He was not a giant arrogant prick, managed to understand all those complex securities without being autistic, and he looks go good next to that other guy! By which I mean Lehman CEO Dick Fuld, but also Thain's his predecessor at Merrill, and his predecessor before that from the New York Stock Exchange, and pretty much any other asshole by whom you could be being laid off right now. From today's Journal:

So it's MotorExpo this week, the fancy British car show that's making its New York debut this year. Where is it being held, you ask? At the World Financial Center, which just so happens to serve as the headquarters of Merrill Lynch. A "black Rolls Royce with a sticker price of $350,000 was parked directly outside a main entrance to Merrill Lynch... the bull in the company logo looking out at the car almost forlornly." [NYT/City Room]

• Yesterday's 504-point drop was the worst day for the Dow since 2001. [NYT, WSJ]

All morning we have been totally fixated the minutiae of the Wall Street Meltdown. And all morning the business media has been desperately scrambling to answer our Big Pressing Questions. Did Hank Paulson do the right thing by letting Lehman fail? Paul Krugman sure hopes so! Why did Bank Of America buy Merrill yesterday instead of waiting for its stock to get pounded and getting in at a cheaper price? All morning long the CNBC people have been scratching their heads, wondering if it took some sort of "nudge" from the Fed! Okay, so here is our big problem: what do we care? There are a lot of things we'd like to understand about what the hell is going on a few blocks south of us right now, but "whether Bank of America is doing the right thing for its shareholders" is not one of them. For instance, what the hell happened? And whom should we vilify? For starters:1. Who allowed banks to borrow 40 and 50 times their cash? No seriously, who ? A couple months ago in an online chat a reader asked Washington Post staff writer Zach Goldfarb to what extent is the subprime problem multiplied by derivatives? As the emailer pointed out, "various financial investors have leveraged" their holdings in iffy mortgages by as much as 50 times their underlying value. Replied Goldfarb: "Simple answer: To a huge extent." Well then! And according to this crazy concept I read about in Krugman's column last week, it seems that in times like these, actually trying to pay off your debt while every other financial institution is doing the same thing can result in a fall in the underlying price of everything that actually leaves everyone deeper in debt, because suddenly its collateral has lost value. This totally happened in Japan! And their economy didn't grow again for another like 15 years. But did banks in Japan even tolerate leverage ratios of 40? And if so, what made us think that was a good idea? 2. To whom do they owe all this money they owe? Lehman's biggest creditor is Citigroup, which was apparently just as risk-happy as Lehman was, and generally, the answer I get to this question seems to be alternately "each other" and "the Chinese" and also occasionally "taxpayers." But I haven't seen a great breakdown. Presumably, creditors are the guys who will see to it this doesn't happen again, but are they positioned to fix stuff like the sorry state of salaries at ratings agencies and the SEC? Yeah, probably not, but we'd be interested to hear! 3. Is it true that banks were allowed to underwrite their own insurance? I'm no expert on the matter — and wow, if that isn't an understatement — but a few months back the Journal ran a story on how Merrill Lynch continued to keep peddling those bundles of mortgage-backed securities called collateralized debt obligations (CDOs) after AIG and other so-called "monolines" — not that it kept them out of trouble! — stopped underwriting a type of "insurance" on the securities known as credit-default swaps. They just did it in-house! They even came up with a dorky pet name for the practice based on the nickname of the (totally inexperienced) guy they put in charge of doing it, Ronnie. "Some employees took to saying that if they couldn't find a specialized bond insurer, known as a "monoline," to take Merrill's risk on the deal, they could resort to a Ronoline," the story explained. (Ronnie is now working for Morgan Stanley in Asia.) But here's my question: to what extent was the "risk management" problem here a function of the fact that issuers were writing their own "insurance"? 4. And hey, did terrible short-selling vulture predators make all this happen? How much money could Goldman make off Lehman's demise? Two months ago Jim Cramer wrote that short-sellers, those crafty capitalists who bet the price of a stock will fall, could "wipe [Lehman Brothers] off the face of the earth" if they wanted. The Wall Street Journal reported Lehman CEO Dick Fuld even called Goldman Sachs chairman Lloyd Blankfein to complain that he'd heard Goldman traders spreading scurrilous rumors about Lehman's imminent demise. So did they? 5. What exactly are the regulations that could avert all this stuff? Returning to Cramer, who wrote of his lonely crusade to reinstate some sort of short-selling rule called a plus tick in July, what exactly are the other major regulations that could avert this sort of disaster in the future? Could the SEC maybe administer an annual aptitude test whereby pothead CEOs like Bear's Jimmy Cayne would be forced to define basic concepts like "credit default swaps" and maybe guesstimate the potential losses to a firm if, say, it sold them to insure a $2 billion portfolio of subprime mortgages that had been leveraged 40 times in the case of a housing crisis that precipitated a 13% rate of default? Or maybe we could just cap the potential net worth of everyone in America at $75 million and then no one would try to make it all so overcomplicated in the first place? 6. Why hasn't the credit crisis yet showed up in the rest of the economy? Seriously, we've joked about this before but how long can trashy European tourists fund our consumption sector now that we've blown our stimulus check load buying 3.3% growth last quarter? The financial sector isn't the economy, but it is a huge chunk of it. When can we expect to see this meltdown reflected in our GDP numbers…and if it doesn't, does that say more about the relevance of Wall Street to the economic reality of the everyday citizen, or the relevance of GDP numbers? A Financial Drama With No Final Act In Sight [NYT] Lehman and the End of the Era of Leverage [Asia Times] Crisis On Wall Street [WSJ] Is This The Death Knell For Derivatives? [Guardian] Credit Default Swaps: Derivative Disaster Du Jour [Global Research] Wall Street's Perfect Storm [Business Week] Dealers Plan Swaps Cleanup [WSJ] Financial Russian Roulette [NYT] The Paradox of Deleveraging [Pimco]

• After frantic takeover talks with Bank of America and Barclays ended over the weekend—and after the U.S. government declined to provide a bailout—Lehman Brothers was forced to file for Chapter 11 bankruptcy protection this morning, marking an end to the 158-year-old firm. [Bloomberg, NYT, WSJ]

• Will today be Lehman's last day as an independent firm? Last-minute discussions continue with several possible rescuers, including Bank of America and possibly Barclays, and the Fed has said it has no plans to bail out the nation's fourth-largest investment bank. [WSJ, NYT, Bloomberg]
  

• Steve Feinberg's investments in Chrysler and GMAC haven't gone as expected and now his Cerberus Capital is on the defensive. [NYT]

• Temasek, Singapore's sovereign wealth fund, has "great confidence" in Merrill CEO John Thain. [Bloomberg]