And we don’t get the details unless they fit the narrative of the moment. For example, it took us by surprise when we found out late in the game that the level-headed engineering grad John Thain lived like the King of Siam, with a Westchester estate big enough to merit five addresses in three towns. That makes his controversial office-furniture purchase more understandable. People, please. If you are going to focus on the personal, at least give us all the gory details, and give them when they matter. We shouldn’t have to scour the tabloids for these.
As for Thain, he is now a full-fledged member of the Rogues Gallery.
Reuters informed us:
Once they were the brightest stars in the investment universe, but Goldman alumni—including Thain, former Treasury Secretary Hank Paulson and former Citigroup Chairman Robert Rubin—look much less brilliant now.
Barron’s also broods over the past, offering us “time-cured aphorisms about bear markets,” including:
‘In a bear market, no eminence of the financial world comes out the other side with his reputation untarnished.’ Alan Greenspan, Henry Paulson, Richard Fuld, even Warren Buffett have either seen their pedestals kicked from beneath them, or at least lowered.
We can now add John Thain—Goldman Sachs and NYSE alumnus, the onetime orneriest sheriff come to town at Merrill Lynch—to this list.
Now this raises a question. If this has become a pattern, why can’t the press see it coming? Or, at least, keep in mind from the beginning that it is a very real possibility? Why build up heroes knowing you will likely be bringing them down again? And in the aftermath give us knowing comments like:
With hindsight, it seems obvious that Mr. Thain, who got his MBA at Harvard Business School, wouldn’t last long.
And actually, this piece gets it wrong even in hindsight! The culture of B of A and the culture of Merrill just weren’t compatible, goes the logic here. But this clash-of-cultures model misses the point. In very important ways Merrill and B of A were the same. That is the story. Not personality or management-style differences.
One of our least favorite techniques for dealing with fallen heroes is revisionist history. Like when Reuters proclaimed that Thain
was regarded until 14 months ago as one of Wall Street’s steadiest hands.
Fourteen months? More like three or four, at most.
And you get a publication like Forbes trying to cover its tracks. Its April 7, 2008, cover story on Merrill turned out to be way off track—“The credit-markets seizure aside, Merrill is in damn good shape”—and got explained this way in October:
Our cover story on Merrill Lynch said the brokerage giant was doing ‘great’ after its $22 billion writedown for lousy mortgage-backed securities. Not great enough. After rival Lehman Brothers was forced into bankruptcy in September, Chief Executive John Thain agreed to sell Merrill to Bank of America for $29 a share, or $50 billion. That was a 70% premium over the market price of $17 a share but well below the $48 a share the government of Indonesia and Davis Select Advisors paid when they pumped $6.2 billion into Merrill in December. Merrill’s fate wasn’t a total surprise, however. Our story cautioned that Merrill still carried on its balance sheets $90 billion in dicey loans and squirrelly derivatives.
Oh, well, all right then. Excellent ass-covering there, Forbes.
Everyone makes a mistake, you say? Maybe, until one remembers that it was precisely this kind of reflexive business-press boosterism—in which all ties go to Wall Street—that helped land us here.
The Journal gave us a nice inside look at negotiations between Merrill and B of A, making clear how active the government’s role was in pressuring Lewis to stick to the deal.