The market may have suspected it would happen, but the move was still bold enough. Merrill's hard downgrade of Countrywide stock on August 15, 2007, even as the Calabasas, CA home lender was arranging $11.5 billion in emergency liquidity lending from a syndicate of large banks, pretty much stuck a fork in the firm as far as mainstream Street analysis was concerned.

All things considered this makes for a better bubble than the last one for Merrill's research shop. Does anyone there still talk about Henry Blodget? "No," global research svp and president Candace Browning says, wryly but matter-of-factly. And the fact is, a gut-churning market does require gut checks: this is now seen as an opportunity. "Certainly the markets have been very, very challenging," the analyst-in-chief says. "In periods of increasing volatility, the value of research goes up."

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