Wall Street's Winners and Losers

Bank of America came out of the weekend as a winner but the folks at Lehman Brothers and New York residents didn't fare as well.

(ABC News)

The Job Loses

It is still too early to say how many people are going to lose their jobs. But experts estimate that following Lehman's bankruptcy and Merrill Lynch's sale, financial sector job losses will total tens of thousands, most of them in New York City.

New York City Mayor Michael Bloomberg said the jobs losses would have an impact on the city's tax revenues. By 2010, he said, the city is projected to have a $2 billion budget deficit.

But Bloomberg also said that the city would remain resilient.

The "vital signs of the city's economy remain strong -- a lot stronger than in much of the rest of the nation," he said. "New Yorkers have gotten through the ups and downs of Wall Street before, and we will get through this one, too. We know how to make tough decisions, we know how to come together, and we know how to emerge a stronger city as a result."

There is also another loss for New York in the Merrill sale: the disappearance of a global business headquarters from New York. Bank of American is based in North Carolina and with all its past acquisitions oversight functions have shifted from local markets to North Carolina. While Merrill is likely to always have a strong presence on Wall Street, it will probably become more of a North Carolina operation, benefiting that state but hurting New York.

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Who is to Blame?

Lehman Brothers CEO Richard S. Fuld, Jr. has been taking most of the brunt. Just back in April he declared that the worst of the credit crisis had passed. Now, five months later, his company is in bankruptcy court.

He has been cast in the same light as James Cayne, the former head of Bear Stearns who was heavily criticized for playing in bridge tournaments while his firm crumbled.

Fuld got a $22 million retirement package in 2007; not giant by Wall Street standards but a lot more than the thousands of Americans losing their homes could ever dream of seeing in their lifetimes. But his reputation will probably be tarnished for some time.

For proof, look no further than a recent Financial Times commentary. The headline said it all: "Hubris – is thy name Richard Fuld?"

It's probably too early to tell if Treasury Secretary Henry Paulson emerged a winner or loser but it is worth noting that many of Wall Street were pleased to see him finally draw a line on taxpayer-backed government bailouts.

Paulson addressed what many refer to as the moral hazard issue: banks and investors will make riskier decisions if they know that ultimately the government will bail them out. By drawing a line with Lehman, he -- at first blush -- appears to have won. But it is still too early to tell the ultimate outcome there and the quickly deteriorating situation at AIG might ultimately force Paulson into another government bailout.