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Tess Vigeland: There’s all kinds of blame to go around and the ripple effects just keep coming in this mortgage mess. And it’s given us a good look at just how incestuous Wall Street can be.

Early in the week, an analyst at investment bank Merrill Lynch downgraded his rating on competing bank Lehman Brothers He cited Lehman’s exposure to the recent credit turmoil. Then, a couple of days later, Lehman Brothers turned around and cut its earnings forecast for Merrill Lynch.

Coincidence, or something else? Marketplace’s Amy Scott tells us questions like that come with the territory when banks cover banks.

Amy Scott: Lehman Brothers’ reassessment of Merrill Lynch yesterday may look like tit for tat. But Lehman didn’t just pan Merrill Lynch. It lowered earnings estimates for Bear Stearns, Morgan Stanley and Goldman Sachs. Analysts say all the big brokerage firms are pretty much in the same boat.

Richard Bove: Except it isn’t a boat right now. It’s kind of a leaky sieve.

Analyst Richard Bove covers investment banks on behalf of investment bank Punk Ziegel. He told his clients to sell stock in all five of the top brokerage firms back in July. Bove warned that the firms’ exposure to risky debt could erode their profits.

But he says it’s typical for analysts to revise their ratings and estimates in the last week of the quarter. And what a quarter it’s been.

Bove: It’s only at the end of the quarter that they pull together some statistics from places like the New York Stock Exchange or the New York Federal Reserve, and then they come out with their estimates. So while it appears very clearly that these guys are trying to get each other, they’re not really doing that.

Still, research analysts know the perils of covering the very industry that employs them.

Brad Hintz follows banking stocks for Sanford Bernstein:

Brad Hintz: All of the companies that you cover treat you as if you’re a KGB agent. Are you really an analyst, or are you really there to gain intelligence about the company?

If Lehman Brothers had wanted to avenge its downgrade by Merrill Lynch, it backfired. After Lehman’s warning came out yesterday, stocks in all five of the top brokerage firms fell, including Lehman Brothers.

In New York, I’m Amy Scott for Marketplace.