John Thain

Thundering Herd running out of steam?

Jim Kim — Thu, 16 Oct 2008 20:23:31 -0400

Can Merrill Lynch's Thundering Herd--its army of stock brokers--survive under Bank of America? CEO Ken Lewis is betting that it will, but not everyone is so sure. The conventional wisdom as of late is that independent advisers have a marketing advantage now, given the woes of the traditional wirehouses. The reputations of the likes of Morgan Stanley and Merrill Lynch's brokerage units may have suffered as the subprime crisis embroiled their parents. Merrill just reported its fifth straight loss. Some think the time is ripe for both clients and brokers to leave. So a few brows were raised when Merrill Lynch reported that its wealth management unit's assets under management fell to $1.5 trillion last quarter from $1.6 trillion. This as Charles Schwab managed to boost assets, reports the AP. But the number of Merrill brokers actually climbed a bit. It's way too early to tell if the brand has really suffered.

For more:
- here's the AP article

Dr. Doom vs. Goldman Sachs

Jim Kim — Sat, 11 Oct 2008 08:14:05 -0400

Nouriel Roubini--the most famous of cosmic bears these days, the man the New York Times dubbed Dr. Doom--doesn't think much of Goldman Sachs' chances of survival. In an opinion piece in Forbes, he argues that Goldman Sachs' and Morgan Stanley's days are numbered, even with their recent capital injections. "If John Mack and Lloyd Blankfein don't want to end up like Richard Fuld, they should do a John Thain today and merge as fast as they can with other large commercial banks." That says it all. He doubts that the world really buys their "conversion" to commercial banks, not without the capital structure of a commercial bank. He errs, however, when he asserts that most of Goldman's business lines are losing money, Goldman argues in its rebuttal. The firm says that Roubini needs to differentiate among specific firms and that Goldman is poised to survive. Roubini, of course, famously predicted that every major independent broker deal would fail. He's been more than half right so far. At this point, Morgan Stanley would appear to be in more danger and more likely to enter a bailout merger.

For more:
- here's the column
- here's the rebuttal

Thain to stay at Bank of America

Jim Kim — Thu, 02 Oct 2008 12:56:06 -0400

The CEO merry-go-round has been in overdrive in the financial securities industry. John Thain, who was brought on as CEO of Merrill Lynch to a lot of fanfare, looked like he would be another short-termer after he was essentially forced by events into a deal with Bank of America. Some speculated he would leave after the deal was struck. But the Financial Times reports that he will stay on as president of global banking, securities and wealth management. Immediately, you have to wonder if Thain is the guy who the Bank of America board is eyeing as the replace for current CEO Ken Lewis, 62. It looks like he will be given every opportunity to prove that he's their man. As of now, however, he is one of ten executives who report to Lewis.

For more:
- here's the article

Assessing the John Thain era at Merrill Lynch

Jim Kim — Tue, 16 Sep 2008 10:09:23 -0400

The John Thain era at Merrill Lynch was short, but long on drama. It ended on a good note. From the moment he stepped in, he was faced with one crisis after another. They all built to the point that the storied brand was threatened. Dominoes were set to crash into it. Thain, unclouded by a long emotional tenure at the firm (perhaps unlike Lehman Brothers CEO Richard Fuld), was clear-eyed enough to see the end, though it just might have survived the Lehman crisis. Still, Thain played it safe and did what he had to. He sold out to Bank of America at a price that leaves little room for shareholders (Merrill's anyway) to quibble. The brand will survive. Bank of America will continue to use it. It's unclear what role Thain will play if any. My guess is that he will move on.

For more:
- here's a New York Post article

Breakingviews awards gold medals in financial Olympics

Jim Kim — Mon, 11 Aug 2008 18:44:42 -0400

In honor of the summer Olympics, here are some medals that Breakingviews would like to see: A "shot put" medal for John Paulson: His big "put" on the subprime crisis made for a very good year. But how much longer can such puts work? How to play the bottom is vexing many. An "$8 billion backstroke" medal to John Thain: He's been doing some back-tracking as of late. A "poll vault" award to Jerry Yang: Turns out Yahoo's service provider miscounted the votes at the recent annual meeting. He received 66 percent of shareholder votes, not 85 percent. What are some medals that you would like to see?

For more:
- here's the Breakingviews article

Merrill Lynch's deal-making prowess at issue

Jim Kim — Thu, 07 Aug 2008 17:10:56 -0400

Merrill Lynch has been beaten up profoundly in the press. Most of the criticism has been pointed at John Thain's several pronouncements that the firm's capital position was solid, which seemed to always precede major capital moves. Now another source of criticism is emerging: his deal-making prowess. Some have questioned the financing Merrill Lynch is providing to Lone Star to buy its CDO portfolio, noting that it amounts to writing a call. The idea is that it has given away the upside while retaining the downside. Fortune now asks why Merrill got so little from its sale of its stake in Bloomberg. It received $110 million in cash for the sale. The rest comes in 10-year and 15-year notes. Merrill is also providing some financing, though the deals are sketchy. Merrill Lynch is not really bargaining from strength. At least we can agree on that.

For more:
- here's the Fortune article

WaMu no longer in need of capital?

Jim Kim — Thu, 07 Aug 2008 17:09:41 -0400

Thanks to Merrill Lynch's John Thain (fairly or not), people tend to be skeptical when they hear from CEOs that their bank's capital ratios look good. So what should one think of rumor-battered Washington Mutual CEO Kerry Killinger's statement to a Fox-Pitt Kelton analyst that thrift's liquidity position is strong? As MarketWatch notes, WaMu has raised cash in several steps in recent months, from the $7 billion raised from Texas Pacific Group and others to the $10 billion raised from tapping the Fed's discount window, the Federal Home Loan Banking system and open market operations. It has accounted for 65 percent of expected losses via set asides and charge offs. So while the losses will keep coming, it may be that its balance sheet is well positioned.

For more:
- here's the article from MarketWatch

John Thain strikes back

Jim Kim — Tue, 05 Aug 2008 08:19:05 -0400

Merrill Lynch CEO is feeling some heat right. The latest source of controversy: his decision to sell Merrill Lynch's portfolio of collateralized debt obligations at 22 cents on the dollar. That has led many to speculation about the value of similar assets at other firms. Thain tells the New York Times the opportunity might have proved fleeting; he had to act for employees and presumably shareholders. Another source of criticism: his decision to sell nearly $10 billion in new stock last month. The offering would have been cheaper if he had waited until various provisions in other deals expired. All in all, you have to give Thain credit for this; he is not sitting on his hands hoping problems go away. In July, he inked seven large deals, the Times notes. He was brought in to the fix the firm and he is taking very active steps to that end. He'll have the satisfaction of knowing that win or lose, he will be judged by his actions.

For more:
- here's the article

Does John Thain have a credibility problem?

Jim Kim — Tue, 29 Jul 2008 21:44:16 -0400

In a way, it's unfair to tar Merrill Lynch CEO John Thain with the "not credible" label. But that description has been voiced a lot this year--fairly or not. MarketWatch notes that in January, Thain said Merrill was well-capitalized and confident of its capital base. In April, Thain said Merrill wouldn't need to return to the equity markets. And earlier this month, Thain reiterated that the firm's capital position was sound and its exposure to CDOs manageable. Of course, it has raised about $18 billion since January, leading to a lot of grumbling. Obviously, in a deteriorating market, circumstances change. What once seemed manageable may no longer appear as such. But his PR and IR people should have been all over him about his choice of words. He no doubt wanted to make definitive statements to be a stand up guy. It may have been wiser to hedge.

For more:
- here's the MarketWatch article

Wachovia CEO buys shares

Jim Kim — Sun, 27 Jul 2008 13:58:09 -0400

More CEOs need to do this: Robert Steel, newly minted CEO of troubled Wachovia, has purchased 1 million shares of Wachovia stock at a personal cost of more than $16 million. The bank needs to make this a bigger deal from a public relations point of view. I have suggested in the past that top executives, especially those who are on the hot seat, could do better than foregoing their annual bonuses. They need to make a direct show of confidence by taking a chunk of their own money and investing it in their banks. I have a feeling that Steel will likely do all right over the long term. I doubt that such a move would have made a difference in the case of deposed CEOs like Stanley O'Neal or Charles Prince. Still, this would be a good time for John Thain of Merrill Lynch, John Mack of Morgan Stanley, and especially Richard Fuld of Lehman Brothers to put their money where their mouths are.

For more:
- here's an article on Steel from bizjournals