CORRECTION: Bank of America says John Thain quits
Thursday January 22, 2009, 2:24 pm EST
(Corrects in 4th paragraph to say that Bank of America shares
fell, not Merrill)
By Jonathan Stempel and Elinor Comlay
NEW YORK (Reuters) - John Thain, former chief executive of
Merrill Lynch, has been ousted from Bank of America Corp, just
three weeks after the companies merged.
Bank of America Chief Executive Kenneth Lewis expressed
dismay last week about the scope of losses from mortgages and toxic
debt on Merrill's books. Investors and analysts said the
losses made Thain's position as head of global banking, securities
and wealth management more tenuous.
"Ken Lewis flew to New York today, met with John Thain, and it
was mutually agreed that his situation was not working out, and he
would resign," Bank of America spokesman Robert Stickler said. The
resignation is effective immediately. Thain could not be reached
for comment immediately.
Bank of America shares fell 6.4 percent in afternoon
trading.
Bank of America had threatened to back out of the merger,
following the December 5 shareholder votes at both companies, but
Lewis said regulators pressed
him to complete the deal.
Last week, the government agreed to inject $20 billion
in capital into Bank of America and to share in losses on $118
billion of debt.
Bank of America said Merrill lost $15.31 billion in the
fourth quarter, separate from Bank of America's own $1.79 billion
quarterly loss -- its first in 17 years.
"This is a huge crisis of credibility," said David Dietze, chief
investment officer at Point View Financial Services in Summit, New
Jersey. "Someone has to fall on a sword."
Separately, CNBC reported the 53-year-old Thain had hired
well-known Los Angeles interior designer Michael Smith to
redecorate his Merrill office a year ago. CNBC said Thain ran up a
bill of $1.22 million that included $35,115 for a "commode on legs"
and $1,405 for a parchment waste can.
Smith's designing company could not be immediately reached for
comment. The bank declined to confirm the report and Merrill
representatives declined to comment.
Bank of America said the terms of Thain's departure would be
disclosed later.
OTHER EXECUTIVES DEPART
Thain's departure leaves Lewis without several top executives at
Merrill, which it acquired on January 1 for $19.4 billion. Just a
week ago, Lewis told investors he was happy that Thain was staying
on.
Other top Merrill executives to recently leave include Robert
McCann, who was to lead the combined brokerage, and investment
banking chief Greg Fleming.
The bank said Tom Montag, another former Merrill executive who
took over Bank of America's sales, trading and research operations,
is staying, contrary to a CNBC report he was leaving. Montag could
not be reached for comment.
Lewis, who has spent some $130 billion on major mergers
to build Bank of America, has raised the hackles of investors who
believe the Merrill purchase was too many.
Pessimistic analysts have speculated the government may
eventually need to nationalize one or more large banks if the
global recession and credit crisis get worse.
Bank of America stock "is remarkably cheap by traditional
measures," said Jack Ablin, chief investment officer of Harris
Private Bank in Chicago. But he said, "The investment is still
fraught with risk because of the potential for nationalization or
the need for dilutive capital raising."
Shares of Bank of America were down 43 cents at $6.25 on
the New York Stock Exchange, far below the 52-week high of $45.08
set last February 1.
EXPENSIVE TASTE
Reports of Thain's office redecorating came on the heels of
$12.2 billion in net losses at Merrill in the second half of 2007,
as writedowns on mortgages and other toxic debt began to mount.
Thain became Merrill CEO in December 2007.
The reported outlays recalled heavy spending on personal items
by senior executives at other companies, including a $6,000 shower
curtain owned by former Tyco International Ltd chief Dennis
Kozlowski, who is in prison for fraud and other charges.
U.S. Sen. Richard Shelby of Alabama, the top Republican on the
Senate Banking Committee, commenting on the report, said the office
decorations would reflect "bad judgment" on Thain's part.
"I know John Thain and like him, but that was terrible precedent
he set and a terrible decision," Shelby told reporters. "I wouldn't
want my money spent that way."
Thain was considered a candidate to become U.S. Treasury
Secretary if U.S. Sen. John McCain had defeated Barack Obama in the
race for the White House.
HASTY MERGER
By joining Bank of America, Thain immediately became a top
candidate to succeed Lewis, 61, but analysts have long speculated
that he would not want to be in a subordinate role for long. Before
running Merrill, Thain was CEO of NYSE Euronext.
Lewis and Thain negotiated the merger in less than 48 hours, on
the same weekend Lehman Brothers Holdings Inc slid into
bankruptcy.
Thain has received credit for possibly saving Merrill from a
similar fate. but he was later pilloried in the media for not being
more forthcoming to Bank of America.
Lewis, meanwhile, has been criticized by investors and analysts
for overpaying, and not renegotiating the terms once Merrill's
losses became evident.
"There are no winners in this situation," said Michael Holland,
founder of money manager Holland & Co.
Several lawsuits were filed this week against Bank of America,
claiming it rushed into the merger too quickly and failed to
disclose the losses sooner.
"If they can make it through this, two to three years from now
we'll see an IPO of Merrill," said William Smith, CEO of Smith
Asset Management. "We'll go back to how it used to be. Banks are
banks, brokers are brokers, and investment banks are investment
banks."
(Reporting by Elinor Comlay, Juan Lagorio, Deepa Seetharaman,
Jonathan Stempel, Phil Wahba, Dan Wilchins and Lilla Zuill in New
York and Susan Heavey in Washington, D.C.; editing by John Wallace
and Jeffrey Benkoe)
http://finance.yahoo.com/news/Former-Merrill-head-Thain-out-rb-14130109.html
I think John Thian was a patsy, he
became CEO December 2007 just as the subprime financial crisis was
beginning to unfold. 
