As the WSJ reported today, the collapse of Lehman Brothers and the sale of Merrill Lynch to Bank of America is just the latest chapter in a stunning redesign of the financial world.  Stand-alone investment banks are dying rapid deaths, with three down in 2008 already (who can forget the spectacular demise of Bear Stearns?).  In their place, a new king is rising - commercial banks.

The key difference between an investment bank and a commercial bank is the source of their cash flow.  A commercial bank like Bank of America or Wachovia takes consumer deposits, which are insured by the federal government to prevent depositors from pulling out all at once (a major catalyst of the Great Depression in the 1930s that is now prevented by tighter regulation and insurance).  Investment banks take no such deposits, and as a result benefit from lighter government

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Tough as it may be to make sense of the level of heat Wall Street is taking currently – as it seems the mortgage and credit crisis is now sounding five alarms – we sat down recently with Director of Zacks Equity Research Dirk van Dijk, CFA. He was able to offer a realistic perspective for us, even if he can’t sugar-coat all the bitterness from the pill.

Can you give us some perspective on the seismic shifts we’ve already seen in trading this week?

Lehman Brothers (LEH), a firm dating back to before the Civil War is gone, bankrupt, kaput. Merrill Lynch (MER) was pressured by the Fed to put it up for sale to Bank of America (BAC), but was able to negotiate an extremely generous price of $29 a share, a huge premium from the $17.05 price they closed at on Friday. ...

Two hurricanes hit America this weekend - one in Galveston and the other in lower Manhattan - both of which have caused billions of dollars in damage.  The financial landscape has been rearranged as much as the sandbars in the gulf have been.  Lehman Brothers (LEH), a firm dating back to before the Civil War is gone, bankrupt, kaput.  Merrill Lynch (MER) was pressured by the Fed to put it up for sale to Bank of America (BAC), but was able to negotiate an extremely generous price of $29 a share, a huge premium from the $17.05 price they closed at on Friday. 

While the strategic rationale for BAC to buy MER is pretty obvious - it weds the biggest retail bank to the biggest retail brokerage firm - what possessed BAC to pony up that sort of price is far from obvious.  They could have had

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Business New Europe Jason Corcoran in Moscow July 9, 2008A detsky sad, or kindergarten, is an unlikely neighbour for a Russian hedge fund, but James Fenkner is not fazed by a little background noise. The founder and chief investment officer of Red Star Asset Management runs a friendly and informal investment shop on an unassuming residential street situated between Moscow's boulevard and garden ring roads. Red Star's team of seven have their heads buried in work as two-dozen two-year-olds run about shrieking seven floors below. It's also a family affair - Fenkner's sister Elizabeth plays a key role as the head of marketing. The firm was set up in 2005 after Fenkner quit Troika Dialog where he had served seven years as head of research and initially as chief strategist. "The market was just ...