Jan. 22 (Bloomberg) -- John Thain, the former Merrill Lynch & Co. chief executive officer ousted today, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said.

Thain hired Los Angeles-based decorator Michael Smith, chosen by President Barack Obama and his wife Michelle to redecorate the White House, CNBC reported today. Thain paid Smith $837,000 and his purchases included $87,000 for area rugs, $25,000 for a pedestal table and $68,000 for a 19th century credenza, CNBC said.

“It is pretty surprising that John Thain would need to spend that much on a power office in this economy,” said Sheila Bridges, a New York interior designer who decorated former President Bill Clinton’s Harlem office. “I do hope the designer’s fees were also included in that price tag.”

Thain, 53, oversaw the sale of Merrill Lynch to Bank of America Corp. last month, and took over the bank’s wealth management and corporate and investment banking divisions.

Merrill’s $15.4 billion fourth-quarter loss forced Bank of America to seek additional aid from the U.S. government, which last week agreed to provide $20 billion in capital and $118 billion in asset guarantees.

Holding Value

The antiques Thain reportedly purchased will probably hold their value over time, said Clinton Howell, a New York dealer in English furniture.

“Michael Smith is a very smart guy and he buys very good things,” said Howell. “It’s very likely that what he bought was worth the money if Merrill Lynch wants to get their money back.”

Smith’s firm didn’t return a phone call for comment. Merrill spokeswoman Selena Morris declined to comment. Margaret Tutwiler, who was Thain’s spokeswoman at Merrill, said he wasn’t available to comment.

In light of Merrill’s $56 billion in losses from subprime loans and the credit crisis, $1.2 million spent on antiques hardly seems worth getting outraged over, Howell said.

“What John Thain did with his office is a little like noting that somebody failed to turn on his blinker before driving into a train,” said Howell.

Designer Dennis Rolland, who has done homes and offices for financiers including Peter Peterson, the co-founder of Blackstone Capital Partners LP, said it’s unwise to furnish an office with antiques.

‘Too Fragile’

“I would seldom encourage someone in an office to use antique furniture, it’s too fragile,” said Rolland.

Wall Street executives may no longer be able to spend lavishly on perks, said James Post, professor of corporate governance and business ethics at Boston University School of Management.

“That’s symbolic of a pattern that has developed on Wall Street over this past decade of more and more extravagant, more and more lavish, more and more one-upmanship in all of these visible symbols,” said Post. “This may be the last vestige of a culture that we’re not going to see for many years to come.”

To contact the reporter on this story: Peter S. Green in New York at psgreen@bloomberg.net

Last Updated: January 22, 2009 19:18 EST