Bloomberg Tough on Merrill’s Thain

Bloomberg has a tough look at John Thain, the CEO of Merrill Lynch who was brought into save the struggling firm as “Mr. Fixit”, but ended up failing to do so. While he didn’t create the problems at Merrill, Bloomberg points out that he made several critical decisions in the last year that were the wrong ones:

chief executive officer, held on to more than $40 billion of subprime-tainted bonds as the market cratered. He agreed to terms with investors such as Singapore sovereign wealth fund Temasek Holdings Pte. that later cost the firm $4.9 billion. He recruited a chief financial officer with no experience at a securities firm, while more than 40 senior executives, bankers and traders departed. In the end, he merged Merrill into a large bank — a step O’Neal concluded was needed in mid-2007, when the stock was trading at more than six times the price it is now.

This looks bad:

Speaking on an analyst conference call in January, Thain said Merrill had more than enough capital and that “we do not have any plans to raise any additional common equity, and Nelson actually agrees with that.”

The statement hampered Merrill’s financial flexibility because Thain then refused to make decisions that would have forced the firm to raise more capital, according to people familiar with the situation…

“John’s made statements, and we’re not going back on them,” communications chief Margaret Tutwiler said in a meeting with senior Merrill executives in April, according to a person who heard the comment.

And the Bloomberg story closes with a twist of the knife:

O’Neal, Thain’s predecessor, realized earlier than his peers that U.S. securities firms couldn’t survive on their own. He discussed a merger with Bank of America in mid-2007, according to two people familiar with the matter, and he was fired for trying to negotiate a merger with Charlotte, North Carolina-based Wachovia Corp. without prior permission from the Merrill board.

“Thain didn’t do what he was hired to do, which was to save Merrill Lynch,” Hintz said. “If the board had wanted to sell the firm, they could have gotten O’Neal to do that.”

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.