Why Thain Over Fink?

Here’s something you may not have heard:

The surprise selection of NYSE CEO John Thain as Merrill’s new CEO over the more widely expected  BlackRock CEO Larry Fink was based on reasons you may not be aware of. 

What are those reasons? Well, according to CNBC.com, Fink would only agree to take the position if Merrill was willing to give a full and complete accounting of it’s subprime exposure:

"Merrill’s selection of Thain was a surprise because the firm had recently
indicated to BlackRock CEO Larry Fink that the job was his if
he wanted it. CNBC has learned that Fink said he would take the job but only if
Merrill did a full accounting of its subprime exposure. At that point, Merrill,
which owns 49% of BlackRock , moved in a different direction and decided to go
with Thain instead."

I obviously have no way to verify that, but I give the benefit of the doubt to CNBC reporters like Charlie Gasparino and Herb Greenberg.  (UPDATE: I have just confirmed with Charlie Gasparino that he was the one who’s fine investigative work uncovered this; You can see some of the discussion via CNBC video here, right margin, labeled "The New Bull at Merrill").

Note: I don’t know who uncovered this. 

If the story is true, and Fink passed on the position (or was passed over) because of his insistence on a complete sub-prime accounting, apparently not accommodated by Merrill, it makes one wonder what the old lady is hiding.



Merrill Taps Thain After Fink Demanded Full Tally
Charlie Gasparino,
CNBC | 14 Nov 2007 | 04:36 PM

Merrill’s New CEO Hoping To ‘Make Things Better’
By CNBC.com with Wires
CNBC.com 14 Nov 2007 | 05:30 PM ET

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What's been said:

Discussions found on the web:
  1. michael schumacher commented on Nov 15

    As posted yesterday when Mer owns 49% of the firm that you currently work for one/1 would think that a little disclosure would be asked for since if Fink jumps ship he basically could be signing the death warrant for Blackrock and not even know it.

    And yes it does seem pretty childish to go with the person who asked the least amount of questions. THain is going to be a customer now??? I bet he is…..

    I loved the headline:

    “merril taps Thain as first outsider to run the firm”

    Give me a break….outsider my ass…


  2. KP commented on Nov 15

    Merrill has been the biggest bunch of pussies about this whole thing from the beginning.

    They were the first to cry foul when Bear Stern’s fund blew up, they have been completely resistant from the beginning about coming clean about there own exposure….and even now that they have crapped on the carpet several times….they are STILL refusing to just take their lumps, clean house, and move forward.

    Grow a pair! All of you! Now! For all of our sakes! @#$!@#!

  3. bucky katt commented on Nov 15

    Does it really matter who heads up the company, regardless of what they may or may not be hiding?

  4. duus commented on Nov 15

    time to sell stock in Merrill, I’d say.

  5. Winston Munn commented on Nov 15

    In an odd coincidence, Merrill passed over me, too, and I’m sure for much the same reasons – and although they never really talked to me about the job, I figure that somehow they knew so didn’t bother to even ask….probably Big Picture readers….either that or my total lack of qualifications got in the way again…damned job market…sure, 4.7% unemployment…try to get ahead and see what it gets you?

  6. Groty commented on Nov 15

    Maria B. interviewed Thain immediately after yesterday’s market close. Thain unequivocally stated he had been given FULL access to Merrill’s books and records.

    He has no reason to claim later he didn’t know how stinky the pile of pooh is. He has a good idea, and he’s stepping in it anyway.

  7. michael schumacher commented on Nov 15

    And yet another installment of:

    “oversubscribe the Repo.”


    But hey…..Benny boy gave ya $47 billion today to play with. And you still wanted more.

    ever wonder why the market just shoots up on no news??? always seems to happen just after the repo money gets pushed over at about :15 after.


  8. Re-Flate commented on Nov 15

    Sometimes, just sometimes, it is better to pass on a job opportunity if you have a deep sense that it is a suicide mission.

  9. Stuart commented on Nov 15

    “time to sell stock in Merrill, I’d say.”

    I was thinking the exact same thing. And Kudlow keeps crowing it’s time to buy financials. He’s gotta be out of his mind with pending write downs sufficient enough to wipe out their capital. The more they try and cover up, the more they reveal they have ALOT of skeletons to hide. Not so dissimilar to a politician caught lying, and in the process of trying to cover it up, they end up getting themselves deeper and deeper into a steaming pile of bat guano.

  10. r€nato commented on Nov 15


    if Merrill was willing to give a full and complete accounting of it’s subprime exposure:

    “its” not “it’s”. It’s is a contraction of, ‘it is’. “Its” is the possessive form, which surely is what you intended to write.

    have just confirmed with Charlie Gasparino that he was the one who’s fine investigative work uncovered this

    “whose” not “who’s”. “Who’s” is the contraction of, “who is.”

    Someone who writes for a living, should really have a better grasp of the language than this. Yes, I am the grammar police.

  11. Costa commented on Nov 15

    $48 billion come on now, wasn’t it last month they did $41. Guess we can expect a couple more up days. Maybe I will add to that QID position

  12. dblwyo commented on Nov 15

    Thanks – have to look that up. Kudo’s to Fink for being a smart chicken but kudo’s also to Thain for being one with big heuvos. But this shouldn’t be a matter for big brass ones it should be a matter of a well-run business and good governance. Stop me when the the word ENR and WCOM come to mind; stop yourself if you don’t. Other than making the people feel a little better and getting to the bottom of this mess the NEXT questions are what to do about MER’s business model, operational execution and management system. When Thain starts talking about those issues then we’re on to something. If he glides over them then it’ll be a good time to sell. Of course for six months or so there’ll be a trading opportunity when the “glide-over” provokes some runup. And a short-selling opp when it tanks if he doesn’t address the deeper issues.
    At the end of the day it’s not all financial engineering – you actually need to run a business and make it perform.

  13. mhm commented on Nov 15

    – MER is in bad shape
    – MER previous CEO was thinking (too loud) about merging with other banks.
    – Thain joins MER.
    – Thain has long time connections to GS, which is (apparently) in good shape and looking for more deals

    I’d say it is probably time to buy…

  14. esb commented on Nov 15

    If what you want is a fink you better not choose Fink.

  15. bob commented on Nov 15

    Seems better to not have investments in Merrill money market funds

  16. Crush Da Bears commented on Nov 15

    Charlie Gasparino is such a bull-shiter!
    (I can certify it after knowing him for many years)

    Thain was selected because he is an outsider who would not hesitate to cut. (Fink has some emotional attachments with some people in the firm preventing him from cutting and restructuring the firm.)


    BR: WTF are you talking about?

    Merrill’s problems has nothing to do with being overstaffed; Its that they are saddled with billions and billions of bad paper. We now know about some it, and there’s probably more bad paper on the books.

    You are frighteningly clueless!

  17. joe commented on Nov 15

    Thain is no idiot, plus he used to run Goldman’s mortgage desk. I’m pretty sure he did his diligence, and he even mentioned yesterday in his interview that he expects prices to further deteriorate in CDO land. My guess is that he takes a huge Goodwill impairment in Q4 against First Franklin, further writes down CDOs and other structured products, and clears the deck as much as possible. Long term, I think he’s going to be very successful.

  18. michael schumacher commented on Nov 15

    don’t forget he now has a free pass for q4 and most likely Q1 performance.

    If he is sharp he’ll get the bad news out in those two releases before he can’t blame O’Neal. But that assumes that the bad news is ending at this point (hardly!!!!)

    and you (should) know what that means….

    BTW I’m enjoying my joy ride in Spain this week as I ‘ve already gone FASTER than everyone else…and they did’nt have a year off……makes me wonder what I could have done last year…….


  19. jjm commented on Nov 15

    I don’t think many have doubted that Thain would eventually land at the helm of a major investment house. Word is he left GS as he knew he would never run the place, and now the MER opportunity gives him the chance to run a major house, and show GS how very well he can do it.
    As far as the Fink nonsense – why would he ever make such comments when he is already a part of MER via BlackRock? Just makes no sense to inflame the situation considering the relationship.

  20. VJ commented on Nov 15


    (MarketWatch) – Home builder TOUSA Inc.’s third-quarter results “strongly indicate existing shareholders will be completely wiped out, or at the very least diluted to almost nothing,” wrote Morningstar Inc. analyst Eric Landry in a research note Thursday. The troubled company, which operates mostly in Florida, late Wednesday said its quarterly loss widened and that it may be forced to file for Chapter 11 due to the housing slump. Landry estimated the company’s book value is now less than zero.

  21. Chief Tomahawk commented on Nov 15


    Fox Business Channel didn’t break this story?!?

    Must be their policy to “be more business friendly”…

  22. DavidB commented on Nov 15

    Why Thain Over Fink?

    Don’t they have enough finks at MER already?

    Yes, I am the grammar police.

    How ya doin’ grammar, I thought you were dead. Instead you joined the police force which I guess is like being dead

  23. Stuart commented on Nov 15

    Thain should’ve waited and saved himself one helluva headache.

    From naked capitalism….holy crap.

    MBIA, Ambac Downgrade-Related Losses Estimated at $200 Billion
    Bloomberg reports today that a downgrade of the monoline bond insurers MBIA and Ambac, which had been the subject of concern for some time (see here and here), may cost investors as much as $200 billion. If they lose their AAA rating, then any securitized deals that relied on them for credit enhancement will be downgraded. Note that the ratings of other credit insurers that do not have AAA ratings are also under review.

    Derivative markets are putting the risk of downgrade of MBIA and Ambac at less than 50/50, so even the prices of actively traded securities do not reflect the full impact of a downgrade. But much of the paper they insured, like collateralized debt obligations, was illiquid, and those instruments probably have not been shaded downward on the owners’ books. In other words, a downgrade would force the recognition of losses.

    The implications of downgrades are so dire that if the credit guarantors cannot improve their situation via capital raising or reinsurance, analysts expect either banks or the government to step in.

  24. Political Animal commented on Nov 15

    Full Accounting

    FULL ACCOUNTING….Merrill Lynch was widely expected to appoint BlackRock CEO Larry Fink as its new chief after Stanley O’Neal left the company earlier this month. Instead they chose NYSE CEO John Thain. CNBC’s Charlie Gasparino explains what happened:…

  25. zack commented on Nov 15

    I know, Stuart. I have puts out into next spring on both of them.

    The Buffett bounce – refuge of lugging longs – of the last few days has been trying, but I have some time in these yet.

    If you read the financials carefully, they are levered something like 100:1.

  26. Max commented on Nov 15

    Why would Thain take the job without knowing the extent of the problem? His first executive order should be to get a complete accounting of the mess.

    I’m not buying that Merrill will not produce a complete account. How can you run a business that way?

  27. DC commented on Nov 15

    Gasparino is a complete tool. Every appearance he makes is interruption-filled torture. “Essentially” it’s all about Charlie and his “sources.” He’s lucky if he’s batting .225 — and that’s probably a stretch. Today Gasbag got his back up when a (real) reporter from the FT poured cold water on the Fink story. Wouldn’t go long with a single thing that insufferable git reports.

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