Merrill's Thain Out At Bank Of America
MICHELE NORRIS, host:
A giant of Wall Street is stepping down. John Thain has had an illustrious career. Most recently, he served as CEO of Merrill Lynch. Last fall, he helped broker the deal that delivered Merrill Lynch into the hands of Bank of America. And Thain emerged with a top position at Bank of America.
But today, came word of what's being called a resignation. But as is often the case, there's a lot more to the story than meets the eye. And so NPR's Jim Zarroli joins me now to help explain what's going on. Hey, Jim.
JIM ZARROLI: Hi, Michele.
NORRIS: What's the reason that Bank of America gave for Thain's departure?
ZARROLI: Well, the company just issued a very terse statement. They said he had met with Ken Lewis, the CEO of Bank of America. The two of them decided together that things weren't working out, and he should go.
You know, the fact is, the departure comes after some pretty negative stories about Thain. Bank of America's in a sensitive spot right now. It lost money last quarter for the first time in many years. And it had to go hat in hand to the federal government to ask for $20 billion in financial assistance to make sure the deal went through, and that was on top of the money, the $25 billion, it has already gotten.
NORRIS: You mentioned some negative stories about Thain. Tell us what you're talking about there?
ZARROLI: Well, one of them was that Thain spent $1.2 million to redecorate his office at Merrill Lynch last year. Now, you know, that's a lot of money for a company that was losing money at the time. I think a more significant story is that he granted about $4 billion in bonuses to Merrill executives in December, rather than wait until January as was customary. Now, I'm told that's not illegal. So, what is wrong with that?
Well, if he had decided to wait, then the takeover would have gone through, the takeover by Bank of America. The bonuses would have had to be approved by Bank of America, and they would probably have rejected them. So, it looks like Thain was trying to sort of get these bonuses under the wire. We should also point out here that these were bonuses for other executives, not for Thain and not for several other top executives.
NORRIS: Profligate spending may help explain his departure, but is it possible that there might have been other reasons?
ZARROLI: Well, the decision about bonuses is a pretty serious matter in that, you know, Bank of America doesn't just have financial problems right now, it also has political problems. It's gotten a lot of money from the federal government, from the Troubled Asset Relief Program. And there are lot of members of Congress who are just very unhappy now about the way the money from the program has been spent.
So, if it comes out now that Merrill Lynch did this, you know, little maneuver to get bonuses through right before Bank of America went to the government to ask for more money, it just looks really bad. So, Bank of America may have felt like it was just too risky to keep Thain on, and given how much money Merrill lost, I'm sure they weren't all that sorry see him go.
NORRIS: Jim, what more can you tell us about John Thain and his reputation on Wall Street?
ZARROLI: He is very well respected. He's very smart, seen as a good deal maker. He was the CEO of Goldman Sachs. Then on two occasions, he was called to rescue a troubled institution - one was the New York Stock Exchange after the Richard Grasso pay scandal. Then he was called in to take over Merrill Lynch after it was caught up in the mortgage downturn.
Now, he clearly tried very hard to keep the company going, and then, finally, when the losses proved to be too great, he helped broker this big acquisition by Bank of America in one weekend last September. Things, at first, went OK, but I think Bank of America began to realize that the losses were just a lot worse than it had realized, and the relationship, you know, soured. It also has to be said CEOs often leave companies that get taken over, but in this case there were a lot of reasons for him to go.
NORRIS: Thank you, Jim.
ZARROLI: You're welcome.
NORRIS: That's NPR's Jim Zarroli.
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