John Thain ousted at Merrill Lynch

The FT reports:

John Thain was ousted on Thursday at Merrill Lynch, just three weeks after the brokerage firm was acquired by Bank of America. Mr Thain's departure came in a meeting with BofA chief executive Ken Lewis, who flew up to New York from Charlotte, North Carolina, for a face-to-face meeting.

This can hardly come as a huge shock to Mr. Thain.  It certainly isn't shocking to anyone who's ever spent more than five minutes in a corporation, or for that matter, a meeting of the Altar Society.  Someone had to go.  And if it wasn't Mr. Thain, it was going to be Ken Lewis.

I've actually developed quite a bit of sympathy for Mr. Thain.  After all, he didn't create the mess at Merrill Lynch; rather, he was brought in to clean up after Stan O'Neal's MBS binge led to predictable results--all over the trading floor.  Given the situation in the markets, and the balance sheet he was handed, I'm not sure how anyone could have expected Mr. Thain to do better at the core mission he was hired for:  taking care of his shareholders and employees.

Nonetheless, you could hardly expect BofA managers or shareholders to take a happy view of his doings, given that much of his hard labor ended up costing them money.  Besides, Ken Lewis needs someone to throw to the wolves running close behind the sleigh.

Most people I've talked to think that regulators made Lewis an offer he couldn't refuse to get him to take on Merrill's toxic assets:  push the thing past shareholders, and he could be sure of the support of Treasury and the Fed in the coming financial chaos.   More than a few people of my acquaintance have suggested that taking this deal was not quite bright, knowing as he did that Treasury was very likely about to change hands.  But when the two most powerful men in American bank regulation come to you with a request, it's got to be awfully hard to say no, sorry, I'd really rather not.  Lehman, after all, shows what happens to those who didn't have Bernanke's and Paulson's backing when the chips were down.

But "making the best of a bad situation" is rarely enough to save CEO jobs.  I suspect that neither a good excuse, nor a substitute victim to feed shareholders, will provide Lewis much protection in the long run--if the shareholders don't get him, the nationalization probably will.