NYSE chief Thain to lead Merrill Lynch
Merrill Lynch & Co., which ousted its chief executive last month after huge mortgage-related losses, on Wednesday named John Thain, the head of the New York Stock Exchange’s parent company, as its new CEO.
Thain, 52, is a Wall Street veteran with extensive experience in trading and technology, including a stint running the mortgage business at Goldman Sachs Group Inc. in the 1980s.
He is expected to overhaul Merrill’s fixed-income division, which was responsible for the $7.9-billion mortgage-related write-down that sparked last month’s departure of his predecessor, Stan O’Neal.
Merrill has “some specific problems, but they’re problems I think I know well and can really fix,” Thain told financial news channel CNBC. “I think there’s a great upside for me and the company.”
Analysts praised Thain’s selection.
“The fact that they got John Thain in to solve these problems is a major coup because he certainly has the capability to do that,” said Richard X. Bove, an analyst at Punk Ziegel & Co. “He is certainly the best guy available.”
Thain, who will start at Merrill on Dec. 1, will eventually stop the bleeding at the firm, some analysts said, but may not be able to prevent more write-downs if the mortgage market deteriorates further.
Merrill shares rose $1.03, or 1.8%, to $57.98 on reports of Thain’s appointment. They gained an additional 64 cents to $58.62 in after-hours trading after the reports were confirmed.
NYSE Euronext Inc. tapped Duncan Niederauer, its president and also a former Goldman executive, to succeed Thain as CEO.
This will be the second time Thain has stepped into a company in crisis. He became CEO of the NYSE in 2004 after its controversial chairman, Richard Grasso, resigned amid revelations of his sizable pay package.
Thain oversaw some of the most dramatic changes in the NYSE’s 215-year history. He transformed it from the equivalent of a members-only club into a public company, greatly boosted its use of electronic trading and merged it with a European rival to form an international exchange.
“He’s taken the NYSE from basically an insular, protected environment to making it a global leader in exchanges,” said Larry Tabb, founder of Tabb Group, a financial research firm. “The odds of doing that and being successful were very long.”
Thain succeeded in increasing the exchange’s use of technology without alienating the floor traders who form the heart of the NYSE’s traditional “open outcry” system.
He won people over by listening to their concerns and building consensus, said floor broker Doreen Mogavero. “Many more people have grown to appreciate John than initially,” she said.
Thain, who has an engineering degree from the Massachusetts Institute of Technology and an MBA from Harvard, held a variety of positions during a 24-year career at Goldman Sachs. He was finance chief before becoming president in 1999.
Thain left Goldman for the NYSE after it appeared that he had fallen out of the running to succeed Goldman’s then-CEO, Henry M. Paulson Jr., who is now U.S. Treasury secretary.
Although Thain has been praised for a quick mind and contemplative demeanor, when he joined the stock exchange critics questioned whether the erudite executive had the temperament to head a major investment bank. His bold strokes at the NYSE appeared to erase doubts about his ability.
Thain’s consensus-building style could be important at Merrill, where he will have to win over the stockbrokers who form the backbone of the world’s largest brokerage firm. Some brokers resent their elite investment-banker colleagues for generating the recent big losses.
Thain’s selection surprised Wall Street, which had expected the board to pick Laurence Fink, the chief executive of BlackRock Inc., a highly successful money manager in which Merrill owns a large stake.
Merrill aggressively pursued Fink, giving the impression that he was the one and only candidate under consideration, according to a person familiar with the matter.
A Merrill spokeswoman did not return calls seeking comment.
“I am thrilled being the CEO of BlackRock,” Fink said in a statement. “Merrill Lynch is a valued strategic partner of BlackRock, and I look forward to working with John Thain.”
