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Merrill Shakes Up Staff After Investment Losses

The world's largest brokerage Merrill Lynch, which is expected to announce third-quarter losses in fixed income, said that global head of fixed income, currencies & commodities, has left the firm.

Osman Semerci has been replaced by David Sobotka, who has been head of Merrill's global commodities business since 2004.

A Merrill spokeswoman confirmed that Semerci and another executive, Dale Lattanzio of the company's structured credit unit, had departed, and that Sobotka will replace Semerci.

She did not give a reason for the departures. A source close to Merrill Lynch who is familiar with the situation said Semerci was fired. Semerci and Lattanzio could not immediately be reached for comment.

Amid a global credit crunch, investors are increasingly concerned more banks might announce losses related to credit problems as they close their books on a tumultuous third quarter.

Facing Big Loss

A Goldman Sachsanalyst said last month that Merrill Lynch faces a $1.5 billion third-quarter loss on its fixed-income business, driven by $4 billion in asset write-downs connected to leveraged loans and mortgages.

"We are assuming a $1.5 billion total loss on the (fixed-income) business,'' Goldman Sachs analyst William Tanona said in a research note.

On September 14, Merrill Lynch warned that shaky credit markets had forced it to reduce the value of securities linked to risky subprime mortgages and other products, a move that could hurt third-quarter profit.

Merrill Lynch is one of the largest issuers of collateralized debt obligations -- a complex type of security which are often backed by assets such as residential mortgages.

Its investment bank also packages pools of subprime loans into securities for investors, and Merrill is exposed to the crisis in the subprime lending industry through its First
Franklin Financial Corp unit.

Global Credit Squeeze

A meltdown in the U.S. subprime mortgage market, sparked by growing defaults on riskier loans, has helped create a squeeze in credit markets around the world.

Amid the credit crisis, major banks have suffered.

Swiss bank UBS said on Monday it was writing down about $3.4 billion in its fixed-income portfolio and elsewhere, triggering its first quarterly loss in nine years.

Also on Monday, Citigroup said it was expecting a fall of about 60 percent in third-quarter earnings on $5.9 billion in losses and write-downs from subprime and leveraged loans, fixed income trading, as well as weakness in its consumer business.

Merrill Lynch said in May that Dow Kim, global markets and investment-banking co-president, was leaving to set up a hedge fund firm.

The Wall Street Journal reported on its Web site, citing people familiar with the firm, that Merrill no longer plans to make an investment in Kim's hedge fund, and he left the firm abruptly this week.

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