The other storm

While Texas and Louisiana were dealing with the damage from Hurricane Ike this past weekend, Wall Street was bracing for the headwinds of a different storm, as investment bank Lehman Brothers filed for bankruptcy Monday, and Merrill Lynch, the nation's largest brokerage, agreed to be bought by Bank of America for $29 a share.

The financial storm's impact is widespread, of course, affecting all of us directly or indirectly. But here's the impact on consumers with a direct relationship with these firms.

For customers of Merrill Lynch, immediate change isn’t likely, as Bank of America decides how to integrate Merrill into its sprawling banking empire. But as with all mergers, there's may be a clash of corporate cultures, and some of Merrill's brokers may be unhappy with the deal. So there's the possibility that your Merrill broker may move on in the next few months.

For stockholders of Merrill, each share will be exchanged for 0.8595 shares of Bank of America.

For Bank of America customers, the only apparent change may be for some customers who use BoA's full-service brokerage, as the bank will undoubtedly waste little time leveraging the Merrill Lynch brand to lure new customers. Customers of BoA's discount brokerage probably won't notice much of a change. But those who have a dedicated financial adviser should probably be on the alert for possible changes in the near future. Also it's important to note that BoA's brokerages are non-bank subsidiaries, and are not insured in any way by the Federal Deposit Insurance Corporation.

Lehman Brothers Holdings, with over $613 billion in debt, filed for bankruptcy. Its retail brokerage business, Lehman Brothers Inc., is covered by Securities and Exchange Commission rules requiring that customers' cash, securities, and insurance products are segregated from the parent company's activities. In a press release, the SEC says it will oversee the transfer of Lehman’s retail accounts to another brokerage firm.

Customers of Lehman Brothers Inc. should not be directly impacted by the bankruptcy, according to the Securities Investor Protection Corporation, which works to bring about an orderly transfer of customers’ assets to other brokers in such cases. "It appears that all customer cash, stocks and other securities are accounted for," says SIPC in a press release.

Even if you don't think you own shares of any of these institutions, you may in fact own mutual funds that hold the stocks or bonds. Lehman's stock, of course, becomes worthless, and the bondholders should recover some of their principal, depending on the seniority of the debt. Merrill Lynch's stock will be exchanged for Bank of America stock, and it'll be up to the fund manager to decide to keep or sell it. —Chris Horymski