Kenneth Lewis is getting a hard lesson in the new balance of power between Washington and Wall Street.

The Bank of America Corp. chairman and chief executive had agreed to buy brokerage giant Merrill Lynch & Co. in September, possibly saving it from collapse. But by early December, Merrill’s losses were spiraling out of control. Internal calculations showed Merrill had a horrifying pretax loss of $13.3 billion for the previous two months, and December was looking even worse.

Mr. Lewis had had enough. On Wednesday, Dec. 17, he flew to Washington, ready to declare that he was through with Merrill, people close to the executive say.

“I need you to know how bad the picture looks,” Mr. Lewis told then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, according to accounts of the conversation by people inside the government. Mr. Lewis said Bank of America had a legal basis to abandon the deal.

Messrs. Paulson and Bernanke forcefully urged Mr. Lewis not to walk away, praising the bank’s earlier cooperation — but warning that abandoning the deal would be a death sentence for Merrill. They said the move also could undercut confidence in Bank of America, both in the markets and among government officials. Despite the blunt talk, Bank of America executives interpreted the comments as a signal that the government was willing to work out a compromise.

Two days later, in a follow-up conference call, federal officials struck a harder tone. Mr. Bernanke said Bank of America had no justification for ditching Merrill, according to people who heard the remarks. A Federal Reserve official warned that if Mr. Lewis did so and needed more government money down the road, Bank of America could expect regulators to think hard about their confidence in management. Mr. Lewis was told that the government would consider ousting executives and directors, people close to the bank say.

The threats left no doubt: The federal government saw itself as firmly in charge of U.S. financial institutions propped up since October by infusions of taxpayer-funded capital.

During the four weeks that followed Mr. Lewis’s conference call, federal officials and Bank of America hashed out a deal to salvage the Merrill takeover. The government agreed to provide $20 billion in additional aid for the Charlotte, N.C., bank, and to provide protection against losses on $118 billion in troubled assets.

The money is coming at a price. Six months into the great bailout of U.S. finance, Washington’s rescue attempt has helped shore up the system. But that emergency effort, planned on the fly, has taken the government on a risky journey deep into the heart of American capitalism.

Bureaucrats are calling the shots behind the scenes at some of the nation’s largest enterprises. Critics of the bailout program say its rules are opaque and its execution ad hoc, leading to a lingering lack of confidence in the the financial system. Some lawmakers are scrambling to steer funds to favored lenders.

Federal officials have said little publicly about their oversight of the institutions that received capital from the Troubled Asset Relief Program. Initially, the government seemed reluctant to use the ownership stakes it got in banks ranging from J.P. Morgan Chase & Co. to Saigon National Bank as leverage over bank executives.

But the tough negotiations with Bank of America, along with other recent moves by federal officials related to executive compensation and other issues, suggest that the government’s attitude toward the troubled banking industry has changed, as financial markets have deteriorated further and political ire has risen.

When Citigroup Inc. took $25 billion in TARP funds in October, the executive-pay section of its pact with Treasury was just two sentences long and vaguely worded. A second rescue, for $20 billion in December, limits Citigroup’s executive bonus pool for 2008 and 2009, requiring that a majority of 2008 bonuses be paid on a deferred basis.

Tough talk by President Barack Obama and other officials about bonuses and perks is making bank executives uncomfortable. Last week, under pressure from Treasury officials, Citigroup canceled its order for a corporate jet. The bank now is exploring its options for modifying the terms of a nearly $400 million marketing deal with the New York Mets.

On Wednesday, Mr. Obama unveiled a series of executive pay curbs, including a strict limit on executive salaries for companies that receive an “exceptional” level of government assistance.

The story of Merrill Lynch’s troubles and subsequent rescue negotiations, pieced together from interviews with people who participated in the process, suggests that the government’s extension of control over the U.S. banking system is evolving on an makeshift basis. Despite agreeing to pump $25 billion into Bank of America and Merrill in October, the government had no idea the securities firm was hemorrhaging money until it was too late to avoid a second bailout.

By the end of November, two months into the fourth quarter, Merrill had accumulated $13.34 billion in pretax quarterly losses, according to an internal document reviewed by The Wall Street Journal. Some Bank of America executives expressed concern about proceeding with the takeover, people close to the bank say. On the advice of their lawyers, the bank decided to go ahead with Dec. 5 shareholder votes on the deal. Shareholders of both Merrill and Bank of America gave their approval.

In September, when the deal was announced, it was viewed as a rare piece of good news during a week when much of Wall Street appeared to be teetering on the brink. On the same weekend that Lehman Brothers Holdings Inc. prepared to seek bankruptcy protection, the 61-year-old Mr. Lewis found a motivated seller in John Thain, Merrill’s chairman and chief executive. Mr. Thain was worried that Merrill might follow Lehman down the drain.

After less than 48 hours of due diligence, Bank of America struck an agreement to buy the battered securities firm for $50 billion in stock, or $29 a share. (The value of the deal has since declined along with Bank of America’s share price.) “I look forward to a great partnership with Merrill Lynch,” Mr. Lewis said, toasting the deal with a glass of champagne.

A month later, Mr. Lewis was at the Treasury Department along with eight other chief executives of large U.S. financial institutions, summoned there by Mr. Paulson. The Treasury secretary wanted the executives to accept a round of government capital totaling $125 billion as a way of shoring up confidence in the banking system.

Mr. Paulson explained that saying no wasn’t an option, according to a person who attended the meeting.

“We are going to do this,” Mr. Lewis replied, urging the other CEOs to call their boards if they needed approval.

After persuading the nine financial institutions to take taxpayer money, the government, at first, refrained from flexing its muscles.

Bank of America executives remained confident about the deal. Doubts began to creep in shortly before Thanksgiving. With more than a month to go until the end of the fourth quarter, the pretax quarterly losses at Merrill were approaching $9 billion, according to people familiar with the figures. By month’s end, the figure had exceeded $13 billion, or $9.29 billion after taxes.

Most of the losses were coming from the securities firm’s sales and trading department. But business was even suffering in Merrill’s lucrative wealth-management unit, which saw its revenue drop to $797 million in December, from $1.08 billion in October. Still, not all the losses, which included expected asset write-downs on assets such as Merrill’s investment in rental-car company Hertz Global Holdings Inc., should have come as a surprise to Bank of America.

In meetings with Merrill managers, Mr. Thain acknowledged big losses, but said they weren’t any worse than those of the firm’s Wall Street rivals, noting that November had been a horrible month for everyone, say people who heard his remarks.

At Bank of America, executives debated whether Merrill’s losses were so severe that the bank could walk away from the deal, citing the “material adverse effect” clause in its merger agreement. Merger agreements typically specify certain “adverse” conditions that give an acquirer the right to abandon a deal.

But lawyers from inside and outside the bank concluded that the losses likely were in line with other firms, and recommended that Bank of America move forward with the purchase, according to people familiar with the discussions.

The deliberations continued up until a few days before shareholders of Merrill and Bank of America were scheduled to vote, one of these people says. Senior Bank of America executives had “mixed emotions,” this person says, but “everyone wanted to see the deal go through.”

On Dec. 5, the deal was approved at separate shareholder meetings in Charlotte and New York. Nothing was said about Merrill’s problems. “It puts us in a completely different league,” Mr. Lewis said about the deal’s completion.

On Dec. 8, Merrill’s board gathered in Manhattan for their last meeting. Mr. Thain said the firm faced continuing losses, but they weren’t unusual, given upheaval in the markets, directors recall.

The next day, Bank of America Chief Financial Officer Joe Price gave a detailed presentation to the bank’s directors about its financial situation and Merrill’s fourth-quarter woes, according to a person familiar with the meeting.

Within a few days, Merrill’s quarterly net losses had swelled to about $14 billion. People close to Bank of America say the losses ticked higher due to trading losses, as well as further asset write-downs.

The trading losses stem largely from legacy positions Merrill Lynch took in previous years.

Mr. Lewis told Bank of America directors in a conference call that the bank might abandon the acquisition, which was supposed to close in two weeks.

In mid-December, Edward Herlihy, a partner at law firm Wachtell, Lipton, Rosen & Katz who had helped set the merger talks in motion, reached out to Ken Wilson, a former Goldman Sachs Group banker and a top deputy of Mr. Paulson. By then, Merrill’s losses had reached almost $21 billion on a pretax basis, roughly equivalent to about $15 billion in net losses, and some of Bank of America’s lawyers felt there was sufficient grounds to invoke the legal clause to torpedo the deal.

Mr. Herlihy, a longtime adviser to Bank of America, expressed concern to Mr. Wilson about the size of the losses, according to people familiar with the matter. Mr. Wilson was stunned by the news. Get Mr. Lewis to call Mr. Paulson, Mr. Wilson said, according to people familiar with the conversation.

At the meeting the next day, Dec. 17, Messrs. Paulson and Bernanke asked Mr. Lewis to give government officials time to think through their options, according to people with knowledge of the discussions. Mr. Lewis agreed and returned to Charlotte.

People close to Mr. Thain say he was unaware of Bank of America’s concerns. On Dec. 19, he hopped a plane to Vail, Colo., with his family, people familiar with the matter said.

That same day, about 20 people in Charlotte and Washington dialed into a conference call that included Mr. Lewis, other Bank of America executives, Messrs. Paulson and Bernanke, and other Treasury and Fed officials. Mr. Bernanke told Mr. Lewis that Fed staff members had concluded there was no way for the bank to invoke the material-adverse-change clause in the takeover agreement that would allow it to abandon the deal.

Government officials also warned Mr. Lewis that withdrawing from the deal would frazzle the markets, spark a flurry of lawsuits against Bank of America and tarnish the bank for years. A senior Fed official ratcheted up the pressure, telling Mr. Lewis that any future requests for government assistance would cause officials to consider taking a heavier hand in Bank of America’s operations.

The government’s tone wasn’t hostile. But the implication was obvious, people close to Bank of America say. As the bank’s primary regulator, the Fed can force out executives if the agency concludes they are behaving irresponsibly. Mr. Lewis responded matter-of-factly that that government should do what it had to do, and Bank of America would do the same.

Asked what he needed to move ahead with the deal, Mr. Lewis responded that Bank of America wanted additional capital and protection against future losses on Merrill’s assets — something akin to the protection J.P. Morgan Chase & Co. received from the government when it agreed to take over Bear Stearns Cos. last March. Messrs. Paulson and Bernanke agreed to keep talking.

Over the next several days, government officials sifted through the books at Bank of America and Merrill, wrangling over which toxic assets to guarantee and how to value them, people close to the bank say. It became increasingly clear that Bank of America’s balance sheet also was packed with assets that faced bruising write-downs, these people say.

Later, talks slowed because bank executives were concerned about the 8% interest rate the government wanted on new preferred shares it would take in Bank of America, these people say. Executives also complained that executive-compensation restrictions were being forced on it, despite government assurances that officials didn’t want to punish the bank. The bank wound up agreeing to limit total compensation, including bonuses, to a fraction of the amounts awarded in recent years.

On Jan. 16, Bank of America announced the new bailout. At the same time, it disclosed Merrill’s fourth-quarter net loss of $15.31 billion. Shareholders were floored. Bank of America reported a net quarterly loss of $1.79 billion.

Asked by an analyst about his decision to go ahead with the Merrill deal, Mr. Lewis responded: “We did think we were doing the right thing for the country.”

Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com, Susanne Craig at susanne.craig@wsj.com and Deborah Solomon at deborah.solomon@wsj.com

From wsj.com

Markets continued to resemble a listing ship in a storm, with officers furiously bailing water but unable to control when the punishing wind and rain will pass. The storm just has to do that on its own.

Officials around the world have taken unprecedented steps recently to shore up the global financial system, but confidence remains low and, according to many analysts and traders, that has become an increasingly self-fulfilling problem largely beyond officials’ control. Each day’s stock-market drop sparks worries that fuel the next’s, and each day of high borrowing costs between banks is interpreted as evidence that risks remain high, which props up the next day’s rates.

That stomach-churning pattern continued Thursday as an early 190-point rally in the Dow Jones Industrial Average evaporated, leaving the blue-chip measure on the verge of a seventh straight daily loss. It was down more than 300 points in recent trading, falling below the 9000 mark.

The Dow has plunged nearly 15% during its losing streak so far, and is down 35% from its record finish a year ago.

Peter Cardillo, chief market economist at Avalon Partners, said the 9000 level, could prove to be an important testing ground for whether the broader crisis of confidence has run its course. If the market holds there, as Mr. Cardillo expects it might, the market could begin to build a more sustained rally. But if it breaks through that round number by a significant amount, the bloodletting could continue for days longer, at least.

“It’s getting to a point where it’s every man for himself,” said Mr. Cardillo. “When fear reaches that level, you’re getting close to a bottom. But we’re clearly not there quite yet.”

Among the Dow’s components, General Motors shares were down by 15% in recent trade.

Analysts said that trading has been marked by skepticism that recent actions by regulators world-wide are adequate to stanch the credit crisis. Investors aren’t yet convinced that vast sums of government money will convince banks to start lending again.

“Psychology is not allowing what the economics textbook says should happen to actually happen,” said strategist Doug Peta, of the New York portfolio-management firm J. & W. Seligman & Co.

In particular, Mr. Peta and other Wall Street pros say the stock market is unlikely to make a sustained rebound until the interbank-lending market loosens – a scenario that remained elusive despite Wednesday’s global rate cut and speculation that more easing may be on the way.

According to data from the British Bankers’ Association, overnight U.S. dollar Libor fell to 5.09375%, against Wednesday’s fixing of 5.375%. But longer-term funding pressures tightened. The key three-month Libor rate rose to 6.28125% from 6.27125%, and the one-month rate climbed to 6.08688% from 6.075%.

Those rates are key to setting the prices of credit that banks charge their clients, including companies whose activities drive growth in the broader economy.

“Every single business in the world needs working capital,” said Mr. Peta. “You need to spend money to make something before you can sell it, which is what generates your profits, which is what drives the stock market. That’s why the stress in short-term funding is the crux of the market’s problem right now.”

Other major stock yardsticks were lower. The technology-focused Nasdaq Composite Index fell 0.8% to trade at 1727. The small-stock Russell 2000 tumbled 1.9% to 536. The S&P 500 shed 2.1% to trade at 964, led by a decline in its energy sector, off 8%. The S&P financials fell 5%.

Strategist Jim Paulsen, of Wells Capital Management in Minneapolis, said the fear that has gripped the market in recent days may be an unintended, self-fulfilling consequence of recent efforts in Washington to pass a $700 billion rescue of firms saddled with soured credit bets.

“To sell the bailout to the public, everyone from the President on down had to go out and tell people how bad everything was, that the world was coming to an end,” said Mr. Paulsen. “Ever since, people’s expectations about the economy have gotten worse and worse and worse, and their reaction to each new action to fix the problems has gotten worse and worse and worse.”

Morgan Stanley was down 20%. The firm has slid recently despite assurances from the company and Japanese investor Mitsubishi UFJ Financial that a capital injection is going through.

“For [Morgan Stanley and GM], it remains credit issues,” said Sveinn Palsson, equity derivatives strategist at Credit Suisse. “People are worried how the credit squeeze is affecting the economy and these companies are at the heart of that.”

Another company highly dependent on free-flowing credit markets — student-loan giant SLM — was lower by 16% in recent trading.

Extreme intraday volatility in the stock market has been scaring away buyers, traders say. Many point to the Securities and Exchange Commission’s ban on short selling of financial stocks — bets made with borrowed stock that prices will decline — as one reason for the big swings. Some traders said that some of the declines in Morgan Stanley and GM, both of which were covered under the ban, could have been due to the ban’s end.

Energy stocks were also weaker amid a continuing decline in crude-oil prices. Chevron, a Dow component, was down by 5% in recent trading. The front-month crude-oil futures contract was down almost two dollars in recent trade, leaving oil just above the $87 a barrel mark. Oil prices have deteriorated as the credit crisis has inflamed worries about a global recession and subsequent drop in demand for fuels.

Other commodity prices have also suffered. The broad Dow Jones-AIG Commodity Index edged down 0.1%.

Long-term Treasury prices fell. The 10-year note shed 1-2/32 to yield 3.785%. The 40-year bond was off 1-16/32, yielding 4.121%.

The dollar strengthened against major overseas rivals. The euro cost $1.3654, down from $1.3667 late Wednesday. One dollar fetched 100.96 yen, up from 99.84 yen.

—Geoffrey Rogow and Rob Curran contributed to this article

Write to Peter A. McKay at peter.mckay@wsj.com.

Quoted from WSJ

China’s securities regulator said Sunday it would shortly begin a trial program allowing securities firms to engage in margin lending and short selling, long considered necessary to help the country’s stock market mature beyond its repeated boom-bust cycles.

The China Securities Regulatory Commission said in a statement on its Web site that the program would be started, but it didn’t give a timeline. It said that the brokerages allowed to participate in the program would be decided based on their net capital size and risk capabilities, among other criteria. The trial would be expanded at some point, it said.

Margin trading allows investors to borrow money to buy shares. Short selling allows investors to sell borrowed stocks, typically in a bet that prices will fall.

The introduction of a tool like short selling runs counter to the trend in many markets in the U.S., Europe and other parts of Asia, where regulators have limited the practice. Some companies have blamed short selling for contributing to the lack of confidence that has driven the credit crisis and forced many financial companies to find suitors, seek more capital or file for bankruptcy protection. It is unclear why Chinese regulators are acting now, but the move suggests that the world’s credit crisis hasn’t derailed some of their basic plans to reform.

The decision also suggests Beijing’s policy makers believe a recent effort to boost the market put a floor under the prices of key stocks and lessened the risk that short-sellers might weigh heavily on prices. The government last month pledged that state agencies would buy stock in major listed banks and companies. Officials may have delayed the introduction of short selling during last year’s market rally on concern it could raise the likelihood of a crash.

China’s market structure currently permits investors little leeway to protect themselves from the possibility of a market fall. Local market analysts have said short selling and other hedging measures would give investors another way to prepare for a falling market. Currently, the only option is to sell and walk away.

The Chinese stock market has endured two major boom-bust cycles in about a decade, with the Shanghai Composite Index falling as much as 60% this year before staging a modest bounce in recent weeks. The existence of products permitting investors to bet on a market fall, proponents of such products say, would have taken some of the steam out of the market as it was rising.

The Shanghai index, which was closed last week due to a national holiday, finished Sept. 26 at 2293.78, down 16% for the third quarter, its fourth straight quarterly drop. The market is down 56% since the beginning of the year.

Sunday’s announcement suggests a modest introduction aimed at select brokers, not a new product for the mass of retail investors who do most of the trading on China’s markets. The announcement also made no mention of the possibility of the introduction of stock index futures, a product that is also used for hedging against risks that has been discussed by regulators repeatedly in recent years.

Traders and analysts in recent weeks have speculated that China would likely allow margin lending and short selling soon. Shares of some listed brokerages have risen on hopes that the new businesses would improve their fee income. Brokers’ stocks have also been helped as China’s markets have rebounded from their September lows following news that Chinese government agencies would buy shares of listed companies on the open market.

In August 2006, China’s two stock exchanges issued rules on margin lending and short selling, stipulating the maturity and size of the margins and the stocks in which margin trading and short selling would be allowed. But regulators delayed approving securities firms for margin trades because of concern the new business would add to market turbulence.

Write to J.R. Wu at jr.wu@dowjones.com and James T. Areddy at james.areddy@wsj.com

This is from wsj

The Top 25

• 1. Northwestern University (Kellogg)

  2. University of Pennsylvania (Wharton)

  3. Thunderbird School of Global Management

  4. University of Southern California (Marshall)

  5. University of North Carolina (Kenan-Flagler)

  6. University of Michigan (Ross)

  7. Cornell University (Johnson)

  8. Columbia University (NY Program)

  9. University of Chicago

  10. Duke University (Fuqua)

  11. Emory University (Goizueta)

  12. University of California — Berkeley (Haas) — Columbia

  13. Columbia — London Business School (Global)

  14. New York University (Stern)

  15. Southern Methodist University (Cox)

  16. University of California — Los Angeles (Anderson)

  17. ESADE

  18. Vanderbilt University (Owen)

  19. Rutgers University

  20. Ohio State University (Fisher)

  21. Purdue University (Krannert)

  22. IPADE

  23. IESE

  24. University of Western Ontario (Richard Ivey)

  25. Fordham University

Executive M.B.A. programs make a big promise: They’ll turn up-and-coming managers into full-fledged leaders, showing them how to think strategically, inspire their staff and expand the business.

So, which schools do the best job of delivering on that bold talk? That’s what we set out to measure in The Wall Street Journal’s first survey of executive M.B.A. programs.

Working with Management Research Group and Critical Insights, we asked thousands of students and hundreds of companies to rank executive M.B.A. programs in a host of categories, with a focus on how well they develop management and leadership skills. The result is a ranking of 25 schools world-wide that takes into account the rigor needed to build tomorrow’s corporate leaders and C-suite executives.

Topping the list: Northwestern University’s Kellogg School of Management, which ranked No. 1, and the University of Pennsylvania’s Wharton School, which came in No. 2. The two schools have among the largest E.M.B.A. programs, with 406 students currently enrolled in Wharton’s two programs and 843 candidates in the seven Kellogg programs, including four international partnerships and a satellite campus in Miami.

What set Kellogg and Wharton apart? The schools got high marks from companies — nearly double those of their nearest competitors — which gave them a clear lead overall. And those stellar grades far outpaced their lower marks from students.

Kellogg and Wharton were ranked at the top more often by companies by a wide margin over their competitors. What’s more, corporate scores varied the most in our surveys, with the leaders outpacing the middle of the pack, and the middle schools leaving the laggards far behind. That variation and wide lead shifted the overall rank in favor of Kellogg and Wharton.

In contrast, student survey scores showed less variation. Kellogg, for example, which ranked No. 15 in the student survey, had a score much closer to that of the leading schools. In a few cases, like that of the No. 1 school in the student ranking, the University of North Carolina’s Kenan-Flagler Business School, a school’s student score was strong enough that the school made the top five.

In all, we surveyed 4,060 students and recent grads from 72 executive M.B.A. programs at 53 business schools in nine countries on how well their program enhanced leadership and management skills; 62% responded.

We also surveyed 455 human-resources and executive-development managers at companies across 23 industries, on the value of the education provided by E.M.B.A. programs. More than 200 officials completed the survey, for a response rate of 44%.

Last, we looked at how well the programs met employers’ and graduates’ expectations when it came to enhancing their management acumen. We measured what employers wanted out of the programs — largely, improved management and leadership skills such as managing change and strategic thinking. Then we asked students how well their programs delivered those skills, and weighted their responses to arrive at a final score.

In all cases, survey questions were developed and survey results analyzed in collaboration with Management Research Group, Portland, Maine. To calculate the final ranking, the corporate and student ratings were each given 40% weight, and the skills rating 20%. (For more information on the methodology, please see “How the Rankings Were Compiled.”)

Wharton was No. 1 with companies and received top marks from students for its curriculum. The program “allows a platform so you can step up to the next level, start implementing [the tools used in the program] and be a well-rounded manager beyond your specific area of expertise,” says Wharton grad Will Tilton, director of global product supply for Shire Pharmaceuticals in Chesterbrook, Pa.

Kellogg came in a close second with companies and received high marks from students for its curriculum and program features. Kristen Dickey, human-resources director of Chicago-based Orbitz Worldwide Inc., says the program’s focus on interactive marketing makes it especially attractive to e-commerce companies like Orbitz: “It’s a unique feature that we benefit from.” The company sponsors several Kellogg E.M.B.A. students.

Rounding out the top 5: the Thunderbird School of Global Management, at No. 3, lauded by students for its global-business focus; the University of Southern California’s Marshall School of Business, at No. 4; and the University of North Carolina’s Kenan-Flagler Business School, at No. 5.

UNC, Thunderbird and USC also led the student rankings, getting high marks for program quality, leadership education, faculty quality and program support. USC, UNC and Emory University’s Goizueta Business School were top rated in the management and leadership skills ranking.

Four international schools made the overall list: ESADE and IESE, both of Spain; IPADE, which runs executive M.B.A. programs in Mexico; and the University of Western Ontario in Canada. London Business School’s joint program with Columbia University’s Business School also earned a spot in the top 25.

Eyes on the Prize

The survey also provided a window into students’ thinking about the programs: what drives them to pursue executive M.B.A.s, what they get out of them — and how they choose a program in the first place.

Students said E.M.B.A.s are a way to develop leadership skills without losing more than a few days a month in the office. (Unlike traditional M.B.A.s, these programs are usually held every other weekend and often involve distance learning.) And students can take the methods they learn in class and use them immediately to tackle real-world business problems.

One survey respondent summed it up neatly: “Learn on Friday and Saturday, apply on Monday.”

When it comes to choosing a program, the top factor was the school’s reputation (noted by 51% of students in the survey). Take the case of one survey respondent who earned an executive M.B.A. from Kellogg. The school “has a significant reputation in marketing and branding,” wrote the student, who said he needed that credibility to move into a different job at work.

Since graduating, he added, “I’ve been short-listed for a couple of very good international opportunities.”

Some schools have excelled by creating a reputation around other specialties. Frank Wilson, director of finance for the Chicago Police Department, chose Thunderbird because of its focus on international markets. Before applying, the 46-year-old emailed a Thunderbird professor about how much the program would teach him about doing business in Brazil. Mr. Wilson has traveled there and hopes to work in Latin America one day.

The professor replied within a day, pointing out a course that covers the region. Mr. Wilson says he would have had to attend a European school to get the same international-management exposure he found at Thunderbird.

Faculty, of course, make up a huge part of a school’s reputation — and weigh heavily on students’ decision-making. In the survey, 78% of students said they considered their school because of its distinguished faculty. Indeed, as schools compete for students, they often bend over backward to secure their best faculty for executive M.B.A. programs.

Jessica Kourkounis for The Wall Street Journal

Students inside of Jon M. Huntsman Hall at the Wharton School of the University of Pennsylvania, in Philadelphia on September 15, 2008.

At Columbia Business School, Nobel laureate Joseph Stiglitz co-teaches a weeklong elective course on globalization. At New York University’s Stern School of Business, Edward Altman, known for developing the Z-score formula for predicting bankruptcy, has taught executive M.B.A. students for many years.

Students rated Thunderbird, UNC, Emory, the University of Michigan’s Ross School of Business and Cornell University’s Johnson School as the top five for faculty. For John Burdett, an Emory graduate, the little things made the biggest difference. “Professors had the ability to get information down to our level and explain things in a simple manner,” says Mr. Burdett, chief operating officer at TicketBiscuit LLC, an event-management and ticket-sales company in Birmingham, Ala. “That, for me, is an extreme talent.”

Surprisingly, respondents said cost and location were relatively unimportant when it came to picking a program. And that was true whether or not their company helped pay the bill. Nearly 34% of students said they paid their own way, which can range from $65,000 to $160,000 for tuition alone. (The median out-of-pocket cost survey respondents reported was $45,000.) About 30% of respondents said their employers paid the entire bill, while 13% said their companies paid between 51% and 99% of the cost.

Meanwhile, many students traveled hundreds or thousands of miles to attend class. While about 64% of students traveled less than 50 miles one way to attend these programs, 7% commuted up to 200 miles and nearly 9% trekked more than 1,000 miles one way.

So, what did the programs deliver? Many midcareer professionals said the degree is a genuine career booster that led to a larger role in their organizations and helped them move into management. Overall, 24% of those surveyed say they have been given both a raise and promotion since they started classes, while 30% expect both in the next year.

A Rapid Payoff

Companies, meanwhile, liked programs that delivered a quick return on investment — employees who were able to apply what they had learned immediately.

Behind Wharton and Kellogg, companies surveyed ranked the University of Chicago Graduate School of Business as the top program in overall quality, followed by Duke University’s Fuqua School of Business and the University of Michigan’s Ross School. The companies said schools are doing a better job all around at helping to hone general management and leadership skills among employees who attend. Nearly half said the programs have improved in the past five years. Some 26% said they expect to see those skills put to use immediately, and another 26% expect so within a year of graduation.

Said one employer, who echoes the sentiment of many who answered the survey: “The experience immediately improves critical decision-making skills, general business acumen and increases confidence.”

The survey also showed that companies are seizing on E.M.B.A. education to motivate employees, build bench strength and hold on to talent. Overall, 64% of human-resource-development managers who responded to the survey regard E.M.B.A. programs as a talent-retention tool. And 55% called the degree a critical business investment.

Take the executive M.B.A. fellowship program at Goldman Sachs Group Inc. The company funds the degree for about eight employees a year, which helps those on the executive track feel rewarded, says Carol Pledger, a managing director at Goldman Sachs. “It broadens the leadership and business skills of our people,” she says.

What’s more, employers say the newly minted grads who have been sponsored have a sense of gratitude to the company and are more likely to stay. Allstate Insurance Co. found that workers with new degrees performed “about 20% better and are 80% less likely to leave the company,” says Marsha Love Morrow, Allstate’s director of leadership and performance capacity. The Northbrook, Ill., insurer covers as much as 100% of employees’ executive M.B.A. costs.

Of course, since the programs carry hefty price tags and require time away from the job, companies typically sponsor only their best performers — and many companies simply don’t sponsor any.

J. Emilio Flores For The Wall Street Journal

Students enter Popovich Hall where classes are held at Marshall School of Business.

Room for Improvement

The student and corporate surveys also showed that schools have a ways to go in several areas. A few companies complained that some programs taught students to solve business problems like academic exercises. One respondent said executive M.B.A. students are “more likely to try to run a project along the lines of some classroom exercise…without regards to practicality in our company.”

Some students, meanwhile, had issues with technology. Many schools conduct classroom sessions, team meetings and project work via distance technology such as videoconferencing, but some students say the technology doesn’t always work well or enhance the education. Similarly, few schools scored well with students when it came to teaching executives how to manage remotely or virtually — increasingly a requirement in a global business environment.

Then there’s flexibility — a big issue that many schools have tried in vain to address. Most programs schedule classes every other weekend, and a few offer weeklong sessions spread over about two years, with distance learning in between.

And, regardless of schedule, graduates say they spent a big chunk of their time studying and preparing for class; indeed, 38% spent more than 15 hours a week on class assignments. Course work was definitely an issue for Steven Zell, senior vice president, director of operations and marketing at Valueworks LLC, a Manhattan-based investment-management company.

“It’s safe to say that I haven’t seen some of my friends in two years,” says Mr. Zell, who earned his executive M.B.A. at NYU’s Stern School.

—Mr. Srivastava is a former Wall Street Journal staff reporter. He can be reached at reports@wsj.com. Alina Dizik, Emily Glazer and Jennifer Merritt contributed to this article.

Quick summery:

1. The Dow Jones Industrial Average, which had posted a loss of less than 300 points heading into the House vote, posted a decline of nearly 700 points as the “nay” votes reached a majority. In recent action, the Dow was off more than 490 points, or 4.4%, at 10659.19, down nearly 7% since crisis erupted a few weeks ago on Wall Street following the meltdown of Lehman Brothers Holdings.
2. The S&P 500 was recently down 5.5% to 1146.80. All of the broad measure’s sectors traded lower, led by a nearly 8% slide in its financial category.
3. Oil futures dropped slid almost $8, trading under $100 a barrel in New York as fears about slowing demand due to global economic weakness gripped the commodity markets. The broad Dow Jones-AIG Commodity Index slid more than 4%.

One good news, iPhone price will be dropped. Apple’s shares recently were down 15% at $108.66 on the Nasdaq Stock Market, leading a broad sell off in technology stocks. n its report, Morgan Stanley cited recent negative data such as a string of Macintosh computer and iPhone order cuts and signs of pricing pressure heading into the holiday season. Not good for me, since I just got one.

Wall Street lives on as a capitalist symbol, but the new inhabitants of its bricks and mortar have reduced its reality to an echo.

OK, finally, DJIA

10372.54

-770.59

-6.92%

• September 11, 2001 attacks,  the Dow fell 684.81 points, or 7.1%.

• The largest one-day percentage drop since 1914 occurred on “Black Monday“, October 19, 1987, when the average fell 22.61%.
• The largest one-day percentage gain since the 1930s, 10.15%, occurred two days later on Wednesday, October 21, 1987 bringing the Dow back above 2,000 and in line for a yearly gain.
• The largest one-day point gain in the Dow, an advance of 499.19, or 4.93%, occurred on March 16, 2000, as the broader market approached its top.

The Dow Jones Industrial Average (NYSE: DJI), also called the DJIA, Dow 30, or informally the Dow Jones or The Dow) is one of several stock market indices created by nineteenth-century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.

The average consists of 30 of the largest and most widely held public companies in the United States. The “industrial” portion of the name is largely historical—many of the 30 modern components have little to do with traditional heavy industry. The average is price-weighted. To compensate for the effects of stock splits and other adjustments, it is currently a scaled average, not the actual average of the prices of its component stocks—the sum of the component prices is divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, to generate the value of the index. Since the divisor is currently less than one, the value of the index is higher than the sum of the component prices.

COMPANY NAME	PRIMARY EXCHANGE	TICKER	ICB SUBSECTOR	WEIGHT PCT	USD CLOSE
3M Co.	New York SE	MMM	Diversified Industrials	4.96426	69.45
Alcoa Inc.	New York SE	AA	Aluminum	1.68263	23.54
American Express Co.	New York SE	AXP	Consumer Finance	2.823445	39.5
AT&T Inc.	New York SE	T	Fixed Line Telecommunications	2.144389	30
Bank of America Corp.	New York SE	BAC	Banks	2.623302	36.7
Boeing Co.	New York SE	BA	Aerospace	4.168692	58.32
Caterpillar Inc.	New York SE	CAT	Commercial Vehicles & Trucks	4.583989	64.13
Chevron Corp.	New York SE	CVX	Integrated Oil & Gas	6.215154	86.95
Citigroup Inc.	New York SE	C	Banks	1.440315	20.15
Coca-Cola Co.	New York SE	KO	Soft Drinks	3.751251	52.48
E.I. DuPont de Nemours & Co.	New York SE	DD	Commodity Chemicals	3.00143	41.99
Exxon Mobil Corp.	New York SE	XOM	Integrated Oil & Gas	5.764832	80.65
General Electric Co.	New York SE	GE	Diversified Industrials	1.804861	25.25
General Motors Corp.	New York SE	GM	Automobiles	0.697641	9.76
Hewlett-Packard Co.	New York SE	HPQ	Computer Hardware	3.417441	47.81
Home Depot Inc.	New York SE	HD	Home Improvement Retailers	1.891351	26.46
Intel Corp.	NASDAQ NMS	INTC	Semiconductors	1.372409	19.2
International Business Machines Corp.	New York SE	IBM	Computer Services	8.536097	119.42
Johnson & Johnson	New York SE	JNJ	Pharmaceuticals	4.960686	69.4
JPMorgan Chase & Co.	New York SE	JPM	Banks	3.448177	48.24
Kraft Foods Inc. Cl A	New York SE	KFT	Food Products	2.353824	32.93
McDonald’s Corp.	New York SE	MCD	Restaurants & Bars	4.517513	63.2
Merck & Co. Inc.	New York SE	MRK	Pharmaceuticals	2.295926	32.12
Microsoft Corp.	NASDAQ NMS	MSFT	Software	1.958542	27.4
Pfizer Inc.	New York SE	PFE	Pharmaceuticals	1.33381	18.66
Procter & Gamble Co.	New York SE	PG	Nondurable Household Products	4.920658	68.84
United Technologies Corp.	New York SE	UTX	Aerospace	4.35025	60.86
Verizon Communications Inc.	New York SE	VZ	Fixed Line Telecommunications	2.300214	32.18
Wal-Mart Stores Inc.	New York SE	WMT	Broadline Retailers	4.339528	60.71
Walt Disney Co.	New York SE	DIS	Broadcasting & Entertainment	2.340958	32.75