John Thain did not seem to realise what was about to hit him. Despite presiding over the worst quarterly loss in Merrill Lynch's 94-year history, a brewing "secret bonus" scandal and some frankly tawdry revelations about his decorating extravagances, it was business as usual for Thain last week. On Wednesday, he bought 8,400 shares in Merrill's new owner, Bank of America (BoA), and was finalising plans to jet off to Davos, notes the FT. But the following morning it was BoA chief Ken Lewis who hopped on a plane to confront Thain in his office. Fifteen minutes later, it was all over.
Thain's exit caps the stunning downfall of an investment bank whose name for many is synonymous with Wall Street, says The New York Times. But it is also the derailment of "a charmed career". Little more than a year ago, Thain, 53, was being hailed as "the saviour of Merrill Lynch": the tough, coolly clinical Mr Fix-it who was parachuted in to mop up the mess sustained during the reckless reign of Stan O'Neal.
Thain's Wall Street pedigree was impeccable, says The Sunday Times. A former president of Goldman Sachs (he was CFO before he was 40), he had already saved the New York Stock Exchange from ignominy following the bacchanal excesses of its former chief, Dick Grasso. In Wall Street lore, Thain was cast as a technocratic puritan, and a ruthlessly effective one at that. Some, noting his resemblance to Clark Kent, nick-named him "Superthain"; but the tag that stuck among traders, impressed with his sheer brainpower, was "iRobot". When the subprime bomb exploded in 2007, Thain was shortlisted by several banks, including Citigroup, as a potential leader. "It was seen as Citi's loss when he chose Merrill."
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Thain was hailed a hero again when he engineered Merrill's $44bn sale to BoA following Lehman's collapse last September, says the FT. But the cracks soon began to appear. As a Wall Street blue-blood, Thain found it hard to conceal his disdain for the Main Street hicks based at BoA's headquarters in Charlotte, and a very different picture of his character then emerged, says The New York Times.
Reports surfaced that he had requested a $10m bonus, days before Merrill reported a record-busting $15.3bn quarterly loss and while he was finalising plans for tens of thousands of job cuts. Thain was never paid his bonus, but he rushed through a plan to pay Merrill bankers $4bn in bonuses even as his boss, Ken Lewis, was negotiating a further $20bn bail-out from the US government. The revelations of his $1.2m decorating spree (see below) were the final straw, says The Independent. It seemed a staggeringly ill-judged move. "Investors had rather assumed he would have been in fire-fighting and cost-cutting mode from day one."
Thain has come out fighting, alleging "character assassination", says The Times. He believes Lewis set him up as fall-guy, rejecting accusations he failed to warn BoA about losses at Merrill and misrepresented its risks at the time of the merger. It's turning into a saga of who knew what when, says Breakingviews. But Lewis must also bear his share of the blame. Last year, he said he'd had "all the fun I can stand in investment banking". He should have stuck to his guns.
John Thain's $1.2m office make-over
There's something trashy about a $1,400 waste-paper basket, even it is made from antique parchment, says The New York Daily News. It certainly contributed to the canning of John Thain. Revelations that he signed off more than $1.2m to make-over his office, even as Merrill barrelled towards catastrophe, must be one of the most telling details of corporate excess since Dennis Kozlowski's $6,000 shower curtain. Sure, an $18,000 George IV desk shows more discerning taste than Kozlowski's "Stoli-peeing ice statue of David". But come on John, what were you thinking? asks The Independent. A "commode on legs" costing $35,000? An antique Persian rug at $85,000? The bulk of the bill was an invoice from the celebrity designer Michael Smith, who has been hired to revamp the Obamas' private quarters at the White House. But they at least were prepared to haggle: shelling out $100,000 versus the $800,000 paid by Thain.
The broader lesson from Thain's "pricey trinkets" is that a blind "sense of entitlement" continues to reign in banking, says The Sunday Times. Wall Street banks paid out a record $38bn in the 2007-2008 bonus season and the pay-offs granted to disgraced bank chiefs were no less eye-watering: Merrill's Stan O'Neal received $161m in benefits; Citi's Chuck Prince, $100m. Here in Britain, even the nationalised Northern Rock has showered some £9m on executives. Bankers are completely out of touch with political and public mood, agrees Alex Brummer in the Daily Mail. "The culture of greed... is morally offensive and may even be actionable." City regulators should stamp on it.
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