Photos of Bank of America Corp.'s CEO Ken Lewis tell a sad tale: On Sept. 15, the day he announced the purchase of Merrill Lynch & Co., Lewis looked like the cat who swallowed the canary, having snared one of Wall Street's storied names at the then-cut-rate price of $50 billion. "This was the strategic opportunity of a lifetime," he said. BofA had grabbed Merrill after the weekend collapse of Lehman Brothers Holdings Inc., doubling the size of its investment bank and creating the largest brokerage in the U.S.

Flash forward. In January, Lewis seemed to be choking on Merrill. The deal he touted as a rare opportunity has turned nightmarish, with BofA's stock down more than 75% since Sept. 15. Lewis took the heat for Merrill's unexpected $15 billion write-down in the fourth quarter and for the year-end, pre-closing Merrill bonus bonanza. And Lewis first promoted Merrill CEO John Thain to oversee BofA's investment bank, then sacked him over bonuses, losses and the $1.2 million office renovation. Meanwhile, Merrill talent fled.

"It has all the earmarks of a bad deal," says an investment banker. "The place is in complete disarray," adds another.

Why is this turkey a Deal of the Year? Not just because the Merrill-BofA nuptials have generated headlines. But also because the acquisition of Merrill really marked the demise of what used to be called the independent Wall Street firm. When Thain peddled Merrill to BofA, Lehman was about to go bust and Bear Stearns Cos. had already disappeared into J.P. Morgan Chase & Co. Taking Merrill off the table left "Wall Street" to Morgan Stanley and Goldman, Sachs & Co., which six days later chose to become bank holding companies.

From BofA's perspective, buying Merrill represented the final piece of Lewis' construction of a true universal bank. There is an irony here, because just as BofA was fulfilling that strategy, beleaguered Citigroup Inc. was pondering how to deconstruct the one-stop-shop Sandy Weill had built.

Much of this story revolves around how executives read the unfolding crisis. By the Sunday of that September weekend, Thain realized that with Bear and Lehman gone, Merrill would be the next target. Thain had been at Merrill less than a year, after a long career at Goldman and a successful tenure at NYSE Euronext. He called Lewis to offer up his 94-year-old firm.

Lewis had been engaged in talks to buy Lehman but backed off. Despite his acquisition of mortgage giant Countrywide Financial Corp., BofA, with its massive deposit base and capital cushion, appeared safe. Merrill had mortgage exposure, but it did not appear as wounded as Lehman. And the price was a bargain that might never come along again. Lewis agreed to talk to Thain. After 48 hours' due diligence, they struck an all-stock deal for $29 per share, a 70% premium to Merrill's $17 stock.

While it's unfair to lay everything that has gone wrong at Lewis' feet, he has paid a price for not seeing how bad things would get and for underestimating the cultural challenges involved in integrating the two institutions.

Lewis also misjudged regulators. The presence of Treasury and the Federal Reserve certainly distorted normal merger dynamics. By buying Merrill, Lewis drew cheers from feds happy to see a systemic threat taken under BofA's capacious wing. BofA then received $25 billion in Troubled Asset Relief Program funds ($10 billion of which went to Merrill) in October and when Merrill took the big write-down, he turned to then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to say he might back out. According to reporting in The Wall Street Journal, the pair pressured him to close the deal despite misgivings; in return BofA received $20 billion in additional capital and insurance against further losses.

Shareholders blamed Lewis. "It's fine he did the deal for the good of the system," says Anton Schutz, portfolio manager of Burnham Asset Management's Financial Industries fund. "But, honestly, Jamie Dimon would have gotten a lower price."

Still, the deal that marked the end of Wall Street might yet produce its return: When BofA spins out Merrill, which rejoins Morgan Stanley, Goldman Sachs or, say, Blackstone Group LP in a new band of independents. Stranger things have happened.