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Will investment bank shake-up affect consumers?

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"Merrill Lynch has a great franchise -- much more retail-oriented franchise -- than Bear Stearns or Lehman Brothers had," says Ely. The key thing for BofA is to not screw things up at Merrill. They need to integrate and cross-sell very slowly and deliberately so they don't destroy the strengths of Merrill in the process.

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"But what really counts for the consumer is intense competition at the local level, and I don't see any of this impeding that in any way."

Calming customer fears
Robert Ellis, senior vice president of the wealth management group at Celent, a financial services consulting firm, says retail firms need to talk to customers and calm their fears.

"There's incredible uncertainty, and we have a downward stock market. It's only natural for people to be concerned. What we're seeing is retail firms getting caught in the backwash of some of the bigger industry problems. We started with subprime, which led to the credit crisis, and now that's leading to this huge situation with credit default swaps. We've seen one crisis after another. But the problems are coming from a proprietary-trading, investment banking world. They're not coming from a wealth management retail-public world. Unfortunately, most consumers don't understand the distinctions and so they get nervous."

In addition to these top tier institutions, many community banks are having financial difficulties, and a fair number of them are expected to fail over the next couple of years. Ely says predictions of 150 to 200 community banks failing are probably overstated.

"Of the 11 banks that failed this year, maybe four or five were community banks. The failures this year, particularly the bigger ones, were outliers within the banking industry. IndyMac was certainly not a community bank, nor was ANB Financial. Some of the others may have been in the community bank-size range but they hardly acted like community banks. They were so concentrated in doing construction lending and lending in lots of different markets, which to me is not a community bank."

Go to's Safe & Sound star ratings to check out the safety ratings on your bank.

The information on how you can protect the assets you have in a bank hasn't changed. Stay within the FDIC limits, or check with the National Credit Union Administration, or NCUA, if you have a credit union account.

If you have a brokerage account, the Securities Investor Protection Corp., or SIPC, protects investors at failed brokerages. Visit its Web site for more on how SIPC coverage works.'s corrections policy -- Posted: Sept. 15, 2008
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