On the evening of Friday, October 26th 2007, numerous news organizations are reporting that Stan O'Neal, the chief executive and chairman of Merrill Lynch, is on the hot seat with that firm's Board of Directors and could well lose his position as the autocratic head of "mother Merrill" before the end of the forthcoming weekend. Toomre Capital Markets LLC ("TCM") has only one simple query: "COULD????? Is there any friggin doubt about Stan O'Neal's absolute incompetence as head of this investment bank? How the heck does one manage to lose approximately $8.4 billion on a position of $35 billion??? Why has not this chief executive been summarily fired even before the quarterly earnings announcements were made earlier this week???"

TCM truly wonders if the Merrill Lynch Board of Directors even has a clue of how difficult it is to lose such a large amount of money in structured finance. And that is not even asking the question in the first place of why did Stan O'Neal allow Merrill Lynch to accumulate such a large position in CDOs and intended collateral in the first place? How much turnover in the trading positions were they executing each day? A half billion? Maybe a billion? So maybe three percent of the holding were turning over daily? Did anyone at Merrill Lynch ever think to look at the aged inventory report and ask whether the marks on those particular aged securities were anywhere close to where they could be sold, let alone where they last had an indication of true third-party interest?? Where the heck was simple "walk around" risk management??? Didn't Stan O'Neal's management have a clue their whole CDO position and business was way out of whack relative to what they could distribute to institutional investors?

The Times of London in a story by Suzy Jagger out of New York City reports Merrill Lynch Could Oust Stan O'Neal After Merger Telephone Call. The thrust of this article is that Wall Street is bracing for its first chief executive casualty after the credit turmoil that started with the meltdown of two Bear Stearns hedge funds. The article concludes with "Laurence Fink, chairman and chief executive of BlackRock, the investment firm partly owned by Merrill Lynch, was identified as a possible successor to Mr O’Neal. John Thain, chief executive of the New York Stock Exchange, and an internal candidate, Robert McCann, senior executive overseeing the bank’s 16,000 brokers, were also cited. Mr McCann, who is president of Merrill Lynch’s global private client operation, runs a business that has been insulated from the credit-loss turmoil. The prospect of a disgruntled board, an ousted chief executive and widening losses arising from investments made in sub-prime mortgage-backed debt, led to speculation that the investment bank may also be vulnerable to a takeover. The stock has fallen by as much as a third since the beginning of the year."

With retrospect, do not the shareholders of Merrill Lynch yearn for the days of when a true professional like Jeffrey Kronthal oversaw Merrill Lynch's Collateralized Mortgage Obligation ("CDO") business? Having been the executive in charge of several of these investment bank structured finance deal teams, Lars Toomre is keenly aware of how hard it is for an investment bank to hear warning signals (or even shouts) from its senior business managers.

There is such pressure to continue to record the structured finance profits that roll in when the deal arbitrage window is open. There is an incredibly expensive infrastructure cost to cover and then there are the compensation expectations of a large and specialized staff. Will their bonuses stand up to what their peers might earn? Can a senior manager keep his or her experienced staff or will some of the key staff members walk out the door because they were "underpaid" by Wall Street's bizarre compensation standards? In face of such pressure, it takes incredible fortitude to say simply "STOP!" Jeffrey Kronthal said Stop!! Unfortunately, though, others at Merrill Lynch wanted the deal machine to roll on. Toomre Capital Markets LLC wonders what Merrill Lynch stockholders are now saying with retrospect. Reader's comments and thoughts are welcome.