On Thursday January 22nd 2009, John Thain, the former CEO of Merrill Lynch, resigned from his new post at the merged Bank of America Corporation. Bank of America Chief Executive Ken Lewis flew to New York to talk with Mr. Thain on Thursday, and they mutually agreed "that the situation was not working out" and that he would resign, said Bob Stickler, a spokesman for Bank of America.
Some privately say though that Mr. Thain was fired after the banking giant lost confidence in his leadership, particularly during the transition period since the acquisition was announced in the hours following the collapse of Lehman Brothers on September 14th 2008. Apparently Mr. Thain failed to tell the acquiring bank about mounting losses at Merrill in the fourth quarter. Those losses apparently totaled more than $15 billion and which were much larger than Bank of America had factored into its acquisition analytics.
The shareholder votes were held on December 7th approving the merger. At the time, the large Merrill losses were not disclosed. Sometime later in December, the Merrill Lynch merger team and not Mr. Thain himself informed Bank of America of the losses, quite a bit apparently attributable to soured trading positions. These losses prompted Bank of America to seriously consider walking away from the deal and eventually led to another contribution from the TARP fund earlier this month.
Press reports indicate that Mr. Thain at the time was off skiing in Vail, Colorado. When he returned, apparently on a head count adjusted basis, the Merrill bonus pool was distributed to firm employees three days before the merger was concluded. That bonus pool is said to have been down less than ten percent from the 2007 levels. That is right! Less than a ten percent year prior when most other firms distributed pools that were less than half of the prior year!! Mr. Thain also was apparently scheduled to shortly depart for Davos, Switzerland where the World Economic Forum will be held later this month. This was despite strong hints from others at Bank of America that such a trip would not be appropriate at this time.