Former Merrill chief Thain to lead CIT Group

Former Merrill Lynch chief executive John Thain, who brokered the investment bank's controversial sale to Bank of America, has been named chairman and chief executive of commercial lender CIT Group, which continues to restructure its business following a brief stay in bankruptcy protection last year.

CIT Group, which lends to more than 3,000 businesses, including supermarkets and department stores, was hit hard by the credit crisis and forced into bankruptcy after failing to raise cash to pay off outstanding debt. The more than 100-year-old company also was hurt by mounting loan losses as more customers fell behind on repaying loans during the recession.

Thain, 54, took over Monday, replacing interim chief executive Peter Tobin, who will remain on CIT's board of directors. Tobin had been serving as chief executive since Jeffrey Peek retired on Jan. 15. Thain has also served as chief executive of the New York Stock Exchange and as president and chief operating officer at Goldman Sachs Group.

New York-based CIT will pay Thain an annual cash salary of $500,000. He will also receive $5.5 million in stock annually, of which $2.5 million will be subject to a one-year holding period. The remaining $3 million cannot be sold for three years. Thain could also receive as much as $1.5 million in bonuses based on the performance of the company. The board will determine whether to award the performance-based bonuses.

Holders of CIT's common stock and the government lost their investments when the company filed for bankruptcy protection in November. The Treasury Department had given CIT $2.3 billion in loans as part of its $700 billion financial bailout plan but declined to provide a second round of rescue funding.

CIT moved through bankruptcy in just six weeks because its key bondholders had already approved a reorganization plan.

"Much has been accomplished in recent months to position CIT for renewed success," Thain said in a statement. "We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs."

As chief executive of Merrill Lynch, Thain's deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he was criticized for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.

Thain resigned as head of global wealth management of the combined company in January 2009, after news of the bonus payments surfaced. Bank of America last week agreed to settle a case with the Securities and Exchange Commission over claims that it misled shareholders about the bonuses and more than $15 billion in fourth-quarter losses at Merrill to protect the deal.

New York Attorney General Andrew M. Cuomo filed civil fraud charges against Bank of America and its former chief executive, Kenneth D. Lewis, on similar grounds. Joe Price, who at the time of the deal was Bank of America's chief financial officer but now heads consumer banking, was also charged.

Thain was not charged with any wrongdoing.