Since we're podcasting today about ex-Merrill Lynch CEO John Thain, NPR's David Folkenflik sends this sneak peek at his regular column:
As we segue from the golden age of Bashing the Media to the golden age of Eulogizing the Media, I'd like to pause for a moment to admire an example of a journalist doing her job. As I lack expertise in certain elements of high finance, I'll be appealing at the end of this to professionals to weigh in — but the professionals I'm talking about may be different than the ones you'd expect.
On Monday, a humbled Wall Street titan entered the court of public opinion to try to salvage his reputation.
John Thain, the former CEO of Merrill Lynch, submitted to an interview with CNBC's Maria Bartiromo earlier this week to give context to why he was thrown out on his ear by his new boss, Bank of America CEO Kenneth Lewis. BofA bought Merrill Lynch amid the markets meltdown last September, but the purchase looks more problematic by the day, and has helped trigger the need for yet more government help. Some of Thain's expenses look more problematic as well.
Consider what Bartiromo does in this interview.
Bartiromo has been accused at times of being too cozy with the financial giants she interviews — a charge that has also been leveled more generally at CNBC and at TV financial news shows. A column in The New York Post, a corporate sibling of the rival Fox Business Network, insinuates that Bartiromo only got the interview because she shares a publicity agent with Thain. If so, Thain was mistaken if he thought this appearance would buff his image.
He speaks calmly, and presents as a capable and reasonable executive. But it's worth watching the interview carefully. I find a few of the following excerpts awfully revealing. Such as this exchange (emphases mine throughout), which starts about four minutes in:
BARTIROMO: . . . .But there are real questions— about whether or not you allowed more risk to be taken on and if you came clean about that to Ken Lewis. How much of the loss of that $15 billion loss in the fourth quarter do you attribute to those legacy losses that were already there, tough decisions that you could not get rid of, and how much of it was new position? . . .
THAIN: Maria, virtually all of the losses were from legacy positions that had already been there and the decline in the prices of those— positions. Did we— did we continue to trade? Yes. Did we put on— big risky positions that— were significant contributors to that $15 bill— billion loss? No.
BARTIROMO: So there is no truth to any speculation that there was further risk taken on and you weren't upfront about it to Ken Lewis and that irritated him?
THAIN: Well, I— I can't comment specifically on what irritated him. But— the vast majority of the losses in the fourth quarter were from positions that had been there since I started.
BARTIROMO: John, were— so you were aware of these losses then in September when you did the deal with Bank of America?
THAIN: Well, no, Maria, the— the— in September the— the positions were there. And— the results— we— we obviously don't report— we don't report results other than quarterly. But the market— the market deteriorated in both November and December.
I don't know what Thain is saying there. I'm not fully sure what Thain thinks he's saying there. Bartiromo is asking what Thain knew about Merrill Lynch's financial problems. He took over in late 2007. She asks: How bad were the company's conditions when you sold Merrill Lynch to keep it afloat? And, as far as I can tell, he is saying: a) Most of the bad stuff was from before I arrived; B) Even so we couldn't really know because we only report results quarterly; and C) Besides, things got worse later in the year.
This, friends, is a hash.
Bartiromo then pressed him on spiraling losses at Merrill Lynch — $15 billion in the fourth quarter alone — and on the astounding $4 billion in bonuses distributed to Merrill Lynch's top figures. He made his best case: the bonuses were distributed to those people in the divisions that made money, not those who lost money, and he had to pay what he called market rates to keep them there. (One does wonder where else he feared they might go these days.) Thain acknowledges the market for talent is now in a different place. Later on, at about 14 minutes 50 seconds in, Bartiromo asked about spending corporate funds on his own executive digs:
BARTIROMO: John, I wanna ask you more about the— the— environment that we're in. But I've gotta ask you— first about the office. You spent more than $1 million renovating your office; is this true?
THAIN: Well, first of all, it— it is true. This was a year ago or actually a little bit more than a year ago in a very differ— different— ec— economic environment and a very different outlook for Merrill and the financial services industry. It was my office. It was two conference rooms and it was a reception area. But it is clear to me in today's world that it was a mistake. I apologize for spending that money on those— on those things. And I will make it right. I will reimburse— the company for all of those costs.
BARTIROMO: Why did you need to renovate the office? What was wrong with (former Merrill Lynch CEO) Stan O'Neal's office?
THAIN: Well— his office was very different— than— the— the general decor of— Merrill's offices. It really would have been— very difficult— for— me to use it in the form that it was in. And— you know, I— it needed to be renovated no matter what. It would have been better for me to simply— I should have— simply paid for it myself (UNINTEL).
Yes, just as the CNBC transcript says, it was UNINTEL. What was wrong with Stan O'Neal's office?
Bartiromo is asking the question we would have asked, if we had been there, and if we had thought of it. O'Neal was a captain of finance too.
The more than $1 million in spending may seem small-bore in the overall scheme of things, but combined with the huge bonuses, it appears to have hastened Thain's fall.
And then there's Thain's answer: It wasn't just a single room. The decor didn't fit in with Merrill's overall things. I needed to do it no matter what. But I should have paid for it myself.
This response careens from position to position until it reaches incomprehensibility. If it was justifiable for corporate use, the company should have paid for it. If it's for personal use, why is it being done at the office at all?
Bartiromo goes in for the kill:
BARTIROMO: So it is an environment where jobs are being cut and clearly salaries are being cut. And the firm is reporting all of these losses. At— at— did it occur to you at some point over the process to say this is probably not the best judgment, I better put this off? Or, I mean, clearly not, but when did you start feeling like perhaps it would have been a— a sore thumb? Or were you totally blindsided by it?
THAIN: Well, Maria, remember, this was back in— it really started in December of '07. So the financial industry hadn't melted down yet. I— I had every expectation— that— Merrill Lynch would be a large successful company— that— these office renovations— would be used by me for many years in the future. And we were also doing lots of other things— to— to bring down costs. . . .
So the answer: We were still minting money when I came on board. I figured I'd be around for a long time. And it would come out of other people's salaries and expenditures.
As I said, she stripped him bare.
This wasn't great investigative journalism. (Nor, for that matter, was the disclosure by CNBC's Charlie Gasparino that Thain's driver was making $230,000 a year in pay and bonuses, though it was a damning little nugget.) But it was a nice example of a television journalist simply doing her job.
And now, my promised call for your expertise: Are there any scholars of linguistics or rhetoric out there who can parse the videotape or the transcripts and tell me what Thain is really saying or at least what he is trying to accomplish? Anyone else have strong thoughts? Feel free to post your takes below.