Merrill Lynch CEO O'Neal Out By JOE BEL BRUNO NEW YORK (AP) The unfolding credit crisis has claimed its biggest corporate casualty so far: Merrill Lynch CEO Stan O'Neal. The announcement of his departure Tuesday came after the world's largest brokerage posted a $2.24 billion quarterly loss, its biggest since being founded 93 years ago. Merrill Lynch did not name a replacement for O'Neal, whose ouster had been expected, and who leaves the company with benefits worth $161.5 million. Laurence Fink, the chief executive of investment manager BlackRock Inc., turned down an initial overture from Merrill's board but is in active negotiations, according to a person with direct knowledge of the offer who was not authorized to speak publicly. With the presumed front-runner out of contention, filling the top spot at Merrill Lynch is not expected to be easy given the remaining unknowns from the global credit crisis. Any replacement will face the daunting task of cleaning up investments in subprime mortgages and other risky types of debt, and rebuilding an investment house badly bruised. There is speculation by a number of analysts that Merrill Lynch faces a $4 billion writedown during the fourth quarter. This would be on top of a $7.9 billion charge taken last quarter, a stunning amount since Merrill originally said it would write down only $4.5 billion because of credit market turmoil. O'Neal was also criticized for reportedly approaching Wachovia Corp. about some kind of merger without the approval of his board. "These losses, coupled with rumors that O'Neal had proposed a merger with Wachovia without the board's approval, essentially dug O'Neal's grave," said Morningstar analyst Ryan Lentell. "The new CEO's first priority must be to ensure proper risk-management procedures are in place to prevent a recurrence of the quarter's loss." O'Neal, 56, accepted blame for the losses, which immediately led to calls for his ouster. The mistake would prove to be his last, ending a career that spanned more than two decades at Merrill. He was one of the highest-ranking blacks on Wall Street a stunning climb from his impoverished roots in Alabama as the grandson of a former slave. O'Neal emphasized riskier bets than past Merrill CEOs, rather than the safety of just selling stocks. That strategy which handed Merrill Lynch record results during the market's peak came with a heavy cost during the tumultuous third quarter. Merrill Lynch still has sizable portfolio of complex financial instruments called collateralized debt obligations, which combine slices of different kinds of risk. It was Merrill's bet on CDOs, and the subprime mortgages underpinning many of them, that proved to be O'Neal's downfall. Dealing with that portfolio will be the priority for co-presidents and chief operating officers Ahmass Fakahany and Gregory Fleming. Merrill Lynch said their duties will be split with Fleming in charge of Merrill's front-line businesses, such as its brokerage. Fakahany, a close confidant of O'Neal, will lead back-office functions such as finance and human resources. Robert McCann, the president of the company's wealth management group, was not named in the power-sharing agreement. Both McCann and Fleming were tipped as potential CEO candidates. Among those who had been said to be considered outside the firm were BlackRock's Fink and NYSE Euronext CEO John Thain. O'Neal resigned his board seat at BlackRock, in which Merrill owns a 49 percent stake. A spokesman for Thain declined to comment. Merrill's board is expected to tap someone that can boost morale among its 16,000 brokers. Many of them felt uncomfortable with O'Neal given Merrill's history of having CEOs with trading experience. Merrill Lynch shares fell $2.42, or 3.6 percent, to $65. The price of buying protection against a default on Merrill Lynch bonds also increased after the news of O'Neal's departure, according to Phoenix Partners Group. AP Business Writers Ellen Simon, Rachel Beck and Leslie Wines contributed to this report from New York.