John Thain lands at CIT. CIT board, what are you thinking?
John Thain, the man who orchestrated Merrill Lynch’s transition from Wall Street star to Supernova to huge drag on Bank of America’s bottom line — all the while making sure his people got $3.6 billion in bonuses for their part in that sorry ride — has been named the new CEO of CIT Group.
To hear CIT tell it, it’s almost as though the Merrill debacle is an inconsequential blip on his resume.
Prior to Merrill, Thain served as CEO of the New York Stock Exchange and president and chief operating officer of Goldman Sachs. A CIT spokesman said Thain’s role at the NYSE, where he modernized the exchange and better positioned it to compete in the global marketplace, was one of the accomplishments that most impressed CIT’s board.
I don’t know whether that praise is warranted (wasn’t that one of the things the NYSE board cited in justifying Richard Grasso’s $139 million compensation package?), but maybe it is. But that was several jobs ago.
From what I can tell, he did a masterful job of persuading Bank of America to buy Merrill Lynch, which was going down the tubes, big time.
Actually, I’m not being sarcastic here — Ken Lewis and the other BofA people have been charged with withholding news of Merrill’s huge losses from BofA shareholders, but no one has said Thain lied to them about it. And he sure got a good deal for his people.
But the fact remains, Thain was unable to save Merrill from financial implosion, he’s part of the huge-bonus culture, he’s a member of the Goldman old boys club — and let’s not forget his million-dollar renovation of his office. Does CIT really want to be led by someone who seems to have modeled his spending habits after Tyco’s (now-imprisoned) Dennis Kozlowski?
CIT has cost the taxpayer plenty (with little hope of repayment). But it really seems to have made great strides in solving its own problems. And most important (at least to me) this 100-year-old company seems to be one of the few (only?) bailed out financial firms that really is pumping money back into the economy, rather than just into its executives pockets:
The company moved through bankruptcy in just six weeks because its key bondholders had already approved a reorganization plan. It was able to cut its total debt by $10.5 billion and deferred debt maturities for three years. The same month it emerged from Chapter 11 it made plans to start lending again, committing to fund $500 million in new government-guaranteed loans to small business customers in 2010.
CIT is going back to its roots, which makes hiring a high-profile failure like Thain seem absolutely boneheaded. I’ll bet there are executives at regional banks, people who steered their institutions through the financial storms, who would be honored to run CIT as a conservative, fiscally sound lending institution.
But while I’m baffled at CIT’s choice, I’m not despairing. Thain is getting paid $500,000, with I think a bonus potential of less than $2 million. For folks like me, that’s a small fortune; for folks like Thain, it’s chump change. Wall Street pundits say that one of the main reasons he wanted the job was to repair his reputation. If that is indeed his goal, he has every incentive to manage CIT conservatively and profitably, with an eye toward societal good.
Otherwise, all he’s done is failed upward. The American way.