John Thain is out. The former Merrill Lynch chief executive resigned from Bank of America (BAC) on Jan. 22 after a large fourth-quarter loss at the brokerage, which forced the federal government to come in with more bailout money for the giant bank.
BofA CEO Ken Lewis flew to New York in the early morning to talk with Thain about his position with the bank and, according to a person familiar with the discussion, it was "mutually agreed that his situation was not working out and he would resign."
The latest problem for Thain, a former head of the New York Stock Exchange (NYX), was news reports that some former top Merrill executives had gotten their bonuses on the eve of the brokerage's merger with BofA, which raised eyebrows in light of the hefty $15.4 billion fourth-quarter loss. Thain also drew headlines in December 2008 when he sought a $10 million bonus from Merrill's board, but he quickly backed away from that fight.
Bank of America shares have been in free fall ever since it announced Merrill's huge loss on Jan. 16 and the additional emergency federal infusion of $20 billion in cash and more than $100 billion in guarantees on bad assets at Merrill and the Charlotte (N.C.) bank. In the process, BofA agreed to slash its quarterly dividend to a penny a share.
Shares of Bank of America were down as much as 17% on the news, but regained a bit by mid-afternoon, down just over 10% at around 6.
Stuart Plesser of Standard & Poor's Equity Research put out a missive on the departure saying that he is "not surprised by the news and think it could actually be looked at as a positive for [the bank], given building tension between Thain and [the bank], not to mention some key executive departures, which may have been related to Thain."
And in a press release, Bank of America said that Brian Moynihan had been named president of global banking and global wealth and investment management—the position originally intended for Thain.
Moynihan has been general counsel of Bank of America. Previous to the merger with Merrill Lynch, Moynihan ran the investment bank for the bank. "Brian Moynihan is a strong manager and one of those people who can effectively envision strategy and execute," said Lewis in a prepared statement. "He has excelled at everything we have asked him to do."
Merrill Lynch's recruitment of Thain was considered a major coup after former CEO Stanley O'Neal had been edged out in disgrace in November 2007. At the time, the brokerage had announced the largest loss of its history: an $8.4 billion writedown. Thain was a hot property at the time and was considered a top contender for the CEO position at Citigroup (C) as well. Citi had also lost its CEO, Charles Prince, amid large unexpected losses in the third quarter of 2007. The abrupt departure of Thain from Merrill and Bank of America will undoubtedly taint his reputation as Mr. Fix-It. Thain, a veteran Goldman Sachs (GS) executive, had been ushered in to rescue the troubled New York Stock Exchange in December 2003, which he successfully took public about three years later.
Lewis emphasized that the change in leadership in no way reflects a significant change in direction for the global banking or wealth management units.