Former Merrill Chief Is Out at Bank of America
Friday, January 23, 2009
NEW YORK, Jan. 22 -- Former Merrill Lynch chief executive John A. Thain, who negotiated the brokerage's hastily arranged sale last year to Bank of America, has resigned from the combined company in the wake of fresh losses that unsettled Wall Street and the firm's new owner.
Meanwhile, New York Attorney General Andrew M. Cuomo is investigating whether Merrill awarded "large, secret, last-minute bonuses" to employees days before the acquisition by Bank of America was finalized, according to a source familiar with the matter.
Bank of America spokesman Scott Silvestri declined to comment on Cuomo's inquiry. The source familiar with the investigation declined to be named because of the sensitivity of the matter.
Thain's resignation followed Merrill's report this week that it lost $15.3 billion in the fourth quarter. The magnitude of the loss surprised investors who thought that the worst of the firm's toxic assets had been sold off or written down. But citing what it called a "severe capital markets dislocation," Merrill took additional write-downs including $1.9 billion for leveraged loans and $1.1 billion for commercial real estate.
On Thursday, Bank of America chief executive Kenneth D. Lewis flew to New York to meet with Thain.
"It was mutually agreed that his situation was not working out and that he would resign," Silvestri said.
Merrill paid out $15 billion in compensation last year, down 6 percent from 2007. Cuts ran much deeper at rival firms such as Goldman Sachs, where compensation expenses were nearly halved during the worst financial crisis since the Great Depression.
No bonuses were earmarked for Merrill's top five executives, but that decision was announced only after reports surfaced that Thain had lobbied Merrill's board for a $10 million bonus to recognize his work in selling the beleaguered firm to Bank of America.
It wasn't the first time Thain attracted negative attention since taking the helm at Merrill in late 2007. He was roundly accused of underestimating the firm's financial woes in mid-2008. He also had been criticized for offering rich employment contracts to former colleagues from Goldman Sachs, where Thain had been president before becoming chief executive of the New York Stock Exchange.
When the deal with Bank of America was announced in September, Thain said he had given little thought to his potential role at the combined company. Eventually, Lewis tapped him to head the bank's global wealth and investment management business, a role that will be filled by Brian Moynihan.
Moynihan ran Bank of America's global corporate and investment banking division before the merger with Merrill, and has been serving as the bank's general counsel. The Bank of America-Merrill merger was finalized Jan. 1.