Updated from 9:30 a.m. EDTMerrill Lynch ( MER) finally bid CEO Stan O'Neal adieu Tuesday, but it remains unclear who will next lead the firm. Merrill said O'Neal "decided to retire from the company effective immediately." Merrill pledged to search for a full-time successor to O'Neal, who came under fire for a series of blunders at the brokerage house and for perhaps at times focusing a little too much on his
Then, just three weeks later, Merrill admitted that its losses on collateralized debt obligations and other shaky paper would be still greater -- to the tune of some $8 billion in writedowns. The firm announced a loss of $2.2 billion, or $2.85 a share, for the quarter -- nearly six times the size of the loss O'Neal had projected earlier in the month. O'Neal and finance chief Jeff Edwards compounded their gaffes by claiming on a conference call that Merrill had reserved for the losses conservatively and appropriately -- while failing to offer any substantiation. Analysts have since projected that Merrill will have to take at least another $4 billion worth of asset writedowns tied to its troubled foray into the subprime lending and structured finance areas. In the wake of last Wednesday's third-quarter loss report, which a former Merrill chief reportedly called "sickening," O'Neal is said to have called Wachovia ( WB) chief Ken Thompson and proposed a merger. The Merrill board, which wasn't filled in on the move, responded by forcing O'Neal's resignation and discussing possible candidates to replace him. Adding to questions about O'Neal's judgment are reports that the exec would be due more than $200 million in bonuses in severance pay should he succeed in selling the firm. Since news of O'Neal's likely ouster emerged late last week, Wall Street's focus has been on who will succeed him -- and how weakened the firm might be in the event of another big writedown. Some of the top names include Bob McCann, head of Merrill's wealth management group, Larry Fink, CEO of Merrill's 49%-owned affiliate BlackRock ( BLK), and NYSE ( NYX) chief John Thain. Thain is a former top exec at Goldman Sachs ( GS) -- the firm O'Neal sought to emulate with his changes at Merrill. Shares of Merrill rose more than 10% in the past two sessions as speculation grew about O'Neal's departure. Following the formal announcement, the stock fell 3.1% to $65.33.