The bloodletting of the third quarter is splattering over Wall St this morning, with grim market conditions taking their toll. Merrill Lynch reported a third-quarter net loss of $7.5 billion on write-downs and credit losses on complex debt securities. The once mighty brokerage last month accepted a takeover bid from Bank of America. It said that the net loss applicable to common shareholders widened to $5.58 per share from $2.3 billion and its loss from continuing operations was $5.56 per share, where analysts were expecting a $5.18 per share short-fall.

It also said revenues, excluding $8.3 billion in interest expenses, were $16 million dollars for the quarter. Seem paltry? Well, it was a big turnaround from the $2.1 billion net revenue loss recorded in the second quarter, but a far cry from the $380 million of net revenue taken in the same quarter a year ago. Contrast this with compensation and benefits expenses, which rose 76 percent to $3.5 billion “primarily due to the reversal of compensation expense accruals in the prior-year quarter”.  

Chief Executive John Thain engineered the speedy sale to Bank of America on the same weekend that Lehman Brothers was forced into bankruptcy, with just a few weeks left in the quarter, so there was plenty of writing on the wall. Did Merrill’s army of sales reps run out of steam trying to convince an investment-wary marketplace to take on risk? Given how grim things have been, they should probably be congratulated on managing positive net revenues at all.

Deals of the day:

* A bank founded by Russian gas giant Gazprom has bought one of Russia’s top 50 banks, the latest purchase of a privately owned bank by state-related structures as Russia fights the credit crisis. Gazenergoprombank, whose website says it was “founded by structures included in the Gazprom group”, said in a statement it bought 100 percent of Sobinbank. It did not disclose the price.

* Japanese trading house Marubeni said it has agreed to buy an additional stake in Australia coal miner Resource Pacific Holdings from Xstrata’s Australian coal unit for about 13 billion yen ($130 million).

* Mighty River Power has become a 19.95 percent cornerstone shareholder in wind turbine manufacturing company Windflow Technology with an investment of over $7.1 million.

As the U.S. government takes over large parts of the financial setup, it also seems to be embracing a key Wall Street tradition: secrecy.

U.S. officials including Fed’s Ben Bernanke and Treasury’s Henry Paulson announced plans to spend some $250 billion on buying stakes in banks, but they gave few details on how they plan to distribute the funds or even to whom. Instead, reporters have had take the route of getting details of the plan from unnamed sources.

Nine banks will apparently account for as much as $125 billion of taxpayer money. The government never said which banks will get the money and how much. Four of those nine institutions — JPMorgan, Wells Fargo, State Street and Bank of New York — announced publicly that they were part of the plan, but the other five have had to do so.

It is hard to imagine why the government would not want to make that information public in the first place, after it has those institutions on board anyway, whether they wanted to be or not. The Wall Street Journal reported that the capital injections were essentially rammed down the throat of reluctant banks like Wells Fargo.

Still, Paulson made a point of stressing the nine were “healthy institutions.” Shouldn’t identifying them just back that assertion?

There’s even less clarity on how the recipients of the other $125 billion will be identified.

Before the plan was announced, the Los Angeles Times quoted an unnamed industry insider as saying, “Here we have thousands of banks. The guys at Treasury are thinking as Wall Street people. But they are about to bump into something called democracy. They are going to hear from 5,000 banks, 3,000 credit unions saying, ‘You are picking winners and losers.’”

The paper said the insider spoke on condition of anonymity because he was not authorized to discuss the plan publicly.

(Photo credit: Reuters)