If the sale– expected to be approved by both boards and Federal regulators– goes through then Merrill, the countries largest brokerage firms, would be folded into Bank Of America’s smaller group of wealth management operation. Customers with brokerage accounts at Merrill are unlikely to be financially affected.

Under its previous chief executive officer, E. Stanley O’Neal, Merrill has been heavily involved in the mortgage market and aggressively issued large amounts of investment instruments backed by subprime mortgages. Since then, it has written down more than $45 billion, dwarfing the profits the two years prior to the crisis. After raising $15 billion in new capital, and laying off a staff of 4,000, it was still vulnerable, and investor confidence was declining. Previous efforts to sell off assets and investments such as a stake in Bloomberg, and dump other risky mortgage investments at a loss, yielded results that were not substantial enough.

On the Watch-List

Also on the watch-list radar is insurance super firm American International Group (AIG). The firm, hurting from losses from the credit crisis is seeking a $40 billion line of credit from the Federal Reserve– perhaps only for its own survival. The financial news issued on Monday was that AIG is in talks to sell off major assets involving its auto insurance and asset management business. The New York-based firm has not issued any formal statement of intentions.

Last year, AIG had moved ahead with plans for expanding its auto insurance business when it paid $749 million to buy up the remaining 39% it did not own of online auto insurance specialist 21st Century.

Washington Mutual, the nation’s largest savings and loan, is also rumored to be in serious financial trouble and to be on the FDIC watch-list. The thrift lost 92 percent of market value in the past year.