April 30 (Bloomberg) -- Scott Soltas, head of the global mortgage business at Merrill Lynch & Co., is leaving the firm as Chief Executive Officer John Thain installs his own team, according to people familiar with the situation.

Soltas, 46, opted to take the early retirement package the investment bank is offering to some employees this week, said the people, who declined to be identified because the decision hasn't been announced. Stewart Cutler, a managing director at the firm's asset-backed commercial paper group, is also departing, the people said. Both will stay through June.

Soltas, who stepped into the role five months ago, is leaving as Thain remakes the firm, which is reeling from $31.7 billion in writedowns and credit losses on securities linked to subprime mortgages. Merrill is in talks with former Goldman Sachs Group Inc. executive Peter Kraus about a job overseeing strategy, according to a person familiar with the matter.

Merrill, the third-largest U.S. securities firm, has eliminated 5,220 jobs in the past 10 months, or 8.3 percent of its workforce. Soltas had been with Merrill for 21 years, most recently as head of the global mortgage business. Cutler joined 12 years ago. He was previously at Lehman Brothers Holdings Inc.

Jessica Oppenheim, a spokeswoman for New York-based Merrill, didn't return a call seeking comment.

Merrill, which purchased mortgage originator First Franklin Financial Corp. in December 2006, was the largest underwriter of U.S. subprime-mortgage bonds before the market collapsed last year. The firm was also the biggest issuer of collateralized debt obligations backed by the securities.

Revenue Wiped Out

The credit-market slump, prompted by record defaults by borrowers with poor credit, helped force the ouster of Chief Executive Officer Stan O'Neal. Banks worldwide have recorded $318 billion of credit losses and writedowns since the disruption began in July.

Thain, 52, announced earlier this year he was shutting Merrill's San Jose, California-based subprime-mortgage business and said the firm would take a $60 million charge. Thain has raised $16 billion of capital to help compensate for Merrill's losses.

Merrill eliminated about 2,200 jobs at the First Franklin unit since O'Neal bought it for $1.3 billion. Thain said in January he plans to cut the firm's production of securities backed by home loans and consumer debt. Merrill will instead focus on improving its rankings in sales of stock and other bonds, he said.

Ranks Thinned

Merrill rose 1 cent, or 0.02 percent, to $49.83 in New York Stock Exchange composite trading. The securities firm has fallen 45 percent in the past year.

Merrill's management ranks have thinned since Thain took over in December. Earlier this month, Merrill announced the pending departure of Rohit D'Souza, the head of the stock-trading group. David Sobotka, who runs the fixed-income, commodities and currencies division, has told colleagues that he is considering leaving as well.

In recent months, several department heads that oversee mortgages and related securities at other banks have departed their posts. Dan Sparks, who heads the mortgage division at Goldman Sachs Group Inc., is exiting the firm after 19 years. In October, Chris Hentemann left Bank of America Corp. as the head of its global structured products unit.

``When you look at these capital markets, there's just no activity going on right now,'' said Terry Wakefield, a mortgage industry consultant at the Wakefield Co. in Grafton, Wisconsin. ``I don't know what the people on these mortgage desks are doing all day.''

Merrill is a passive, 20 percent investor in Bloomberg LP, the parent of Bloomberg News.

To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

Last Updated: April 30, 2008 18:15 EDT