Updated from 9:28 a.m. EDT.

Merrill Lynch ( MER) CEO John Thain has plenty of options for his next act after the completion of his firm's sale to Bank of America ( BAC) later this year.

But despite a resume that includes running two hallowed Wall Street institutions and apparent political ambitions, the 53-year-old executive has for now opted to take a back seat to BofA CEO Ken Lewis.

Thain, brought to Merrill less than a year ago to attempt to fix one of the most troubled companies on Wall Street, has agreed to become head of BofA's corporate and investment bank and wealth management business after Merrill's merger with Bank of America is complete. Industry analysts say it is important that Lewis retain key members of Merrill's management team, not only in order to execute a smooth transition at a time of much uncertainty for the brokerage industry, but also because the Charlotte, N.C., bank needs Merrill's expertise in global debt underwriting, global equities and global M&A advisory, after having a tough go of it for its own investment banking business in the past year.

"BofA needs someone that's respected from both sides to make it work because if they just put in someone from BofA who didn't really understand the culture and didn't understand the business, the crown jewel at Merrill -- its brokers -- could just up and leave," says Larry Tabb, the CEO and managing partner of consulting firm Tabb Group.

Thain also "doesn't want to be the guy known as the guy who sold the Merrill legacy to BofA," Tabb says.

Merrill Lynch over the past year has been reeling from its exposure to collateralized debt obligations and other subprime mortgage exposure, resulting in billions of writedowns and losses. The firm's plight led to the ouster of CEO Stan O'Neal, who was soon after replaced by Thain.

More recently, investment banks across the board have faced liquidity problems as a lack of confidence has swept over the financial system, leading to Lehman Brothers to file for bankruptcy and Goldman Sachs ( GS) and Morgan Stanley ( MS) to change their status to bank holding companies.

The Merrill organization needs "continuity," Tabb says. By Thain sticking around -- at least in the near term -- he can provide that to the rattled Merrill workers, he says.

BofA announced Thursday that Thain would stay on in a "major role" once the two companies complete their merger, which is expected by the end of this year.

Thain will become president of BofA's Global Banking, Securities and Wealth Management unit, which will incorporate similar functions from the two companies, Lewis said in a company statement.

"This is an opportunity to create what will be the leading financial institution in the world," Thain said in the statement. "Combining these two companies will create great value for our shareholders and clients around the world."

Brian Moynihan will continue as head of investment banking at BofA until the merger, as well as take on an enterprise-wide role immediately.

BofA agreed to buy Merrill Lynch for $50 billion, or $29 a share, in an all-stock transaction last month, the same day Lehman failed. Expected to be completed by the end of the year, the deal creates a mammoth organization in which BofA will become the largest brokerage in the world with more than 20,000 advisers and $2.5 trillion in client assets.

Jim Eckenrode, a banking analyst at TowerGroup, expressed similar comments as Tabb.

"There is some aspect of visibility to the Merrill employees in terms of how much of a voice they are going to have in a frankly much larger organization," he says. "Certainly Merrill has its own culture and own way of doing things and is an important institution in its own right."

BofA's disastrous results for the third-quarter of last year -- just as the credit crunch kicked off -- led the company to announce roughly 3,000 layoffs and for CEO Lewis to notoriously say on the company's conference call last October that he had had "all the fun he can stand in investment banking at the moment."

Thain, who is less than one year into his role as Merrill's top gun, is no ordinary executive.

Before taking on the job at Merrill late last year, he was CEO of NYSE Euronext ( NYX). Thain, a Goldman Sachs veteran, succeeded in transforming the floor-based iconic exchange into the world's first trans-Atlantic electronic exchange.

Some observers say the decision to be essentially demoted could be demoralizing to a bright, ambitious executive such as Thain.

"Will Thain stay on there forever? He is a young guy. I kind of doubt it," Tabb says. But Thain could stay for the "next few years" as the transition and integration takes place at BofA, Tabb adds.

"I would think that you go from running an organization -- two organizations -- to reporting into someone, on the surface it looks like a step back," according to one Wall Street analyst that asked to remain anonymous. "I think that Thain would probably want to do something bigger, more identifiable ... as opposed to running the investment bank at Bank of America. But it's not a bad job."

BofA is likely making it "economically worth his while" for Thain to continue on at the company, the analyst says.

Still, staying at BofA could be a good move for Thain's ever-improving resume. Observers question whether the move was done with the intention of one day making Thain the successor to Lewis, who is 61.

While analysts say it would likely be a few years before that possibility would occur, Thain is a "great candidate" to run BofA, which amid the consolidation over the past year, including its absorption of mortgage lender Countrywide Financial and Merrill, has solidified itself as one of the top banks in the country.

One other potential career path that cannot be discounted for Thain is politics. He is a well-known supporter of Sen. John McCain (R., Ariz.) and several observers expect Thain to join McCain's administration, should the Republican win the presidential election. Some market pundits have posed Thain could become the next Treasury secretary -- following in the footsteps of his former Goldman Sachs colleague Henry Paulson.

As of the end of June, Thain and his family had contributed more than $50,000 this election cycle to either McCain, the national Republican National Committee and other GOP causes and candidates, according to the Center for Responsive Politics.

Still, others say that given the market turmoil caused by the credit crisis, the general public may not look approvingly of another Wall Street-type as the next Treasury secretary.

"Politically at this point, McCain would be very challenged to bring in Thain," Tabb cautions of a potential McCain administration. "Right now, Wall Street doesn't have the best image across America. I think McCain would take on significant political heat if any one of the leaders from Wall Street were to run a major area of government right now."

But if not next year, Thain could be waiting in the wings for a job in government down the road, the Wall Street analyst said.

Thain's "got many years left in him," the analyst said. "He could go and run BofA and still go for a job in Washington later."

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