Two More Wall Street Dominoes Fall

"This blows anything we've ever seen since 1929 right out the window," says Mendelsohn. "This isn't an LTCM. Bringing together a group of firms to bail out LTCM was a cakewalk. That was nothing compared to what we're seeing here. This is systemic. This is complicated. This is a big problem."

Robert Pavlik, chief investment officer with Oaktree Asset Management, agrees that this weekend's events were a watershed for the financial market. But while the failure of Lehman and the buyout of Merrill will certainly affect a lot more people, including many displaced employees, Pavlik says that the market will eventually navigate the mess and this event will become just another memory in a timeline of market-shaking events.

"Eventually we'll get through this and the financial markets will be in a better position going forward. There will be less excess," says Pavlik. "However, there is more additional downside going forward. There is still a broader problem in the overall market where we have a slowing global economy."

While the end of Lehman and Merrill as standalone companies is certainly a big news item, both became the latest dominos to fall in a serial collapse that has already claimed Bear Stearns, which was sold to JPMorgan at a gigantic discount, as well as Freddie Mac (FRE Quote) and Fannie Mae (FNM Quote), which the U.S. government bailed out, and Countrywide Financial, which was acquired by BofA.

The unfortunate part is that even with the removal of Bear Stearns, Fannie, Freddie, Lehman and Merrill from the chain, there still isn't enough breathing room to keep the next meltdown. "My concern is that we don't have enough space between the Lehman Brothers domino and everyone else," Mendelsohn says. "We're not going to stop the chain reaction. I'm not sure anyone is safe here."