Monday, January 26, 2009

The guy with the gilded trashcan

We've heard of golden parachutes. Now, we get the gilded wastebasket.
You can say you're sorry, Mr. Thain, but you can't erase your new image in the minds of millions who – until last week – probably didn't know you from Marie Antoinette. You're the guy with the $35,000 "commode on legs," an $87,000 area rug and a $1,405 wastebastket.

John Thain (above, left) was the former CEO of Merrill Lynch & Co., which Bank of America bought last September, although the deal didn't close until Jan. 1. He lasted only three weeks with BofA, and "resigned" Thursday, after it became public how many colossal PR screw-ups he had managed to squeeze into a relatively short period of time.

While Merrill Lynch was losing $15.3 billion in the fourth quarter of last year, Thain signed off on bonuses that the Financial Times has reported were $3 billion to $4 billion – paid out in December instead of January as had been the habit. To compare, the proposed stimulus package for the whole state of South Carolina is $3.2 billion.

Driving Merrill Lynch into the toilet was, in Thain's mind, a strong enough performance that he reportedly was lobbying in October for a $30 million to $40 million bonus for himself. By December he'd lowered it to a mere $5 million to 10 million – December also being the month that BofA was learning that Merrill's losses were far vaster than it had known. (No, he didn't get the bonus.)

And last week CNBC broke the news of Thain's amazing $1.2 million office makeover, which included a $35,000 "commode with legs," a 19th-century credenza for $68,000, and that "parchment waste can" for $1,405.

Today Thain said those purchases had been "a mistake in the light of the world we live in today," and he'll reimburse the company for the costs. He said the size of the bonuses had been determined "together with Bank of America." BofA noted that before Jan. 1 it had no legal standing to say yes or no to any Merrill payouts. (BofA CEO Ken Lewis -- above, right -- had previously recommended that he and his top reports not receive bonuses for 2008.)

Here's the scary part: Thain was considered a bright guy who might have been a successor to Lewis. He was CEO of the New York Stock Exchange for a time. At Goldman Sachs, he was No. 2 to Hank Paulson, who became President George W. Bush's Treasury secretary.

And the man is obviously clueless, with a blind spot the size of an $87,000 area rug, and the common sense of an armadillo trying to cross a country road with cars zipping past. He's one of Wall Street's best and brightest? Hmmmm. That may explain some things.
– Posted by Mary Newsom
More Thain reading:


Anonymous said...


Larry said...

People like this have always peppered history.

If it makes you wonder how they can get by with it, simple, they have to have support from a lot of criminal wannabes like them.

Keep in mind the saddest part is that those same lackeys are still in their positions of power and look forward to the breeding of a new person to feed their avarice and greed.


Dan W said...

You can't blame the bonuses on Thain - they were to retain talent at Merrill through the merger. The other decisions he made such as his office renovations were quite a while ago in a different economy. Yes it was tacky but his $1400 trashcan wasn't what killed Merrill.

I'm not defending the guy, but the class warfare bit gets old. While the article says he's clueless - he is in fact pretty darn clever to have sold BofA the "london bridge". Ken Lewis is the clueless one who actually agreed to buy Merrill at that price and without the transparency.

Rick B said...

Here we go again...a bit of criticism of some obviously idiotic conduct by an overpaid buffoon who only survived in his business as long as he did because his business was operating in a self-inflating bubble, and one of his apologists is screamimg "class warfare".

There is nothing "classy" about profligate spending and corporate waste, even when a business is successful. If only one good thing comes out of our entire economic fisaco, maybe it will be the end of $1,400 office wastebaskets. The problem isn't the dollar amount of each ridiculous item; it's that people think that they should be spending such dollar amounts in the first place.

American business had become so arrogant about its own self-perceived "success" - success, of course, only being measured by a single one-dimensional financial metric - that it lost all sense of proportion and of sound, long-term business practice. If a company has $1.2 million to spend on a renovation that more appropriately would have been conducted for $250,000, then the extra $950,000 should have been invested in the business in more productive and responsible ways. The notion that it was "his money" and he could spend it as he wished - it wasn't, but it is now - is yet another of the false talking points often raised by those who justify the unjustifiable conduct of theese business "leaders". It's well past time to remove ego, greed, and corruption from the upper echelons of American business, and restore the sort of responsibility that previously had allowed businesses to operate in a manner that yielded more long-term success and stability.

Finally: the outrageous bonuses were to retain "talent" at Merrill? Talent????? You mean the sort of talent that lost the company 15.3 billion in the fourth quarter alone? Talent?????? Forgive me for being blunt, but that sort of "talent" needed to be awarded penalties, not bonuses or, better yet, pink slips and a swift kick in the rear end through the gilded door - please don't trip over the wastebasket on the way out, dude, that thing was expensive.

Problems such as those at Merrill did not begin in the Carter administration, as some "grasping-at-straws" apologists claim: they started in just the past few years, under the "leadership" of people like Thain and his band of "talented" executives. With such talent, these people wouldn't even make the first cut on American Financial Idol.

Larry got it right: these people and their lackeys are still in power, and will remain so unless something radical changes in the American business psyche. Yes, Ken Lewis is far from blameless: he is part of the "problem class". I don't know what form these changes might take, but a good starting point would be severe penalties - imprisonment and stripping of assets - for the top few thousand of the criminal class (yes, Dan W, that's the only "class" distinction that applies here) and the restructuring of the American business model back to the model of value, responsibility, and long-term thinking.

Somehow, wasteful behavior has become a badge of honor, an indicator of "success" in the new American set of values. Wasteful behavior, excessive pay, and criminal irresponsiblity must be removed from our collective morality, or not only will this be a long depression but any recovery will be very short-lived.

Rebecca said...

Rick B hit the nail on the head: "Wasteful behavior, excessive pay, and criminal irresponsiblity must be removed from our collective morality, or not only will this be a long depression but any recovery will be very short-lived."

This is every bit a moral crisis as well as a financial crisis. It has nothing to do with class warfare and everything to do with right and wrong. Banking has become the new organized crime, only this time the Al Capones of this brave new world are not prosecuted by the government, they are in business with the government, and they are "trakeing out hits" on the rank and file employees, customers and taxpayers.

Anonymous said...

The cost of these items in Thain's office are excessive to say the least. $1.2 million dollars. Shame! But not one mention that this same "interior decorator", with these exhorbitant prices is the decorator of choice by our new president for the White House. I wonder how much of our taxpayer's money will be paid to this guy to redecorate that! Surely his inflated prices and outrageous fees are not being paid out of pocket by the Obama's.

Anonymous said...

You can be critical of Thain all you want, but who did better for their shareholders? Thain got $20per share for a stock was going to be basically worthless had he waited an extra week. BAC stock is down over 80% since the deal was announced. On top of that Lewis's behavior has led to a series of shareholder law suits.

Also, whom do we belive? Recent public comments by Thain have indicated that Lewis knew more than he has let on. Now that Cuomo is involved the whole ugly thing will be played out in public and under oath!

Finally, there is no logical internal successor for Lewis? Give me a break, a firm like BAC should have one, if not two or three candidates internally. Not exactly a sign of a good manager, nor a board that that is being vigilant about protecting shareholders.

Anonymous said...

Rebecca got it right, "banking has become the organized crime." Add to that other big businesses like oil, for one. Having a big degree does not mean a person has common sense or good ethics. These men make Enron look small in comparison. Thain should go to jail and Lewis right behind him if it follows that insider trading was involved. There are MANY people who could take over for Lewis and do a better job. My son in law is one. I am glad someone is looking into things. Where is the BAC board? Asleep?