ML, any thoughts ?

27 Sept 2008 “It was only a few days ago that ML CEO John Thain was viewed as a hero, saving his firm from the same fate that befell Lehman Brothers by merging it with Bank of America. In the midst of the panic swirling the markets last week, ML employees saw Thain as the firm’s saviour. Now that calm has been restored by the prospect of a $700bn US government bailout, however, there are complaints that Thain may have moved too quickly, and that he may have been too hasty in giving up his firm’s independence. ‘The mood here last week was euphoric’, one ML staffer told Here Is The City. 'Now we have had time to reflect, however, many of us are wondering whether Thain really needed to move so fast. A few more days delay, and we would have had no need to have done the Bank of America deal. Early last week, staff were just happy that the whole firm had been saved, but now they are concerned about their own individual jobs, because of a merger that many feel should perhaps never have been entertained in the first place. ML’s CEO has been compared favourably with Lehman Brothers boss Richard Fuld, who is felt to have been too emotionally attached to the firm he built and, in the end, found it impossible to take the painful decisions required to save it. Unencumbered by an emotional attachment to ML, Thain, they say, acted swiftly to save the day. But did this lack of emotion work against ML and its staff in the end ? Would a CEO steeped in the firm’s history have taken a little longer to review the options and think through the possibilities ? Was Thain, in fact, more concerned about how he would be perceived personally than he was about the future of his firm ? ‘Thain was brought in to secure our future, not flog us at the first available opportunity,’ said one ML employee. ‘Do we really still need to do this deal ? Is there any way back ? Do we need Bank of America to stand behind us now, when the rest of the financial markets community has the US government watching its back ?’. Thain is, without doubt, a very impressive man. However, he never really got into his stride at ML, often finding that he was forced to react to events, rather than working to his own agenda. He was wrong-footed on a number of occasions over the firm’s asset writedowns (claiming that there would be no more, only to find that there were many more skeletons in the closet). ML’s shares were under intense pressure in the days leading up to the Bank of America deal (and there were concerns that counterparties would cut credit lines), and Thain found that, once again, he wasn’t master of his own destiny. Would a more experienced Wall Street CEO, or a man with more ML history under his belt, however, have put his foot on the ball and sweated it out for a few more days ? That, of course, is all conjecture. What we do know, however, is that Thain now looks certain to be moving on to pastures new, leaving the firm he was brought in to save firmly under the control of an exceedingly grateful rival.”

There are points on both sides of the argument, but the bottom line is that he had to take action. There is no way he could let the ship list and try and ride out the storm. He had an exit strategy, which, in these perilous times means, he didn’t go under.

what kind of impact do you think this will have on ML emloyees ?

I think that if Thain moves on…no wait…is “moved on” then his successor will probably try to dissolve a lot of the relationships Thain established. Willy

Hindsight is always 20/20…Moreover, MS and GS are barely staying alive as is and their balance sheets are in much better shape than ML

thain made bank off this deal and his short time @ merrill. no one feels bad for him

He did alright. An awful lots of uncertainty and I sure wasn’t second-guessing him last week. Still might turn out to be the best move.

I personally think he did the best in the difficult circumstances that he found himself that weekend. Lehman was failing, MER was next in line for almost every short seller. He found a buyer @ significant premium and he took the offer. Ofcourse, ML might have been able to ride out the storm (with Govt. backing). But then, it might have been insolvent by Wednesday before the Treasury plan for bailout was announced. I for one am glad that he took the offer. He seems to have saved lot of my buddies’ jobs :slight_smile: