John Thain: Public Relations Genius

Thain believes in copious press coverage

I've been spending the past couple of days trying to figure just exactly what happened to John Thain's cranium. Is he feeling OK? I mean, did he fall down while skiing in Vail (you know, while the fourth quarter's red ink was being poured over Bank of America CEO Ken Lewis)? Did he bump his head during one of his regular swimming pool laps?

No, I have concluded that Thain is a public relations genius. He believes, as Brendan Behan once put it, that "there is no such thing as bad publicity except your own obituary." So he decided to flood the zone with horrible publicity, even an editorial in the New York Times. Congratulations!

I tend to agree with Henry Blodget that there's a bit of diversionary action going on here, and that Ken Lewis is at least as deserving of being kicked out as Thain. After all, he's the one that brought ruin on B of A by buying Merrill. Thain was just doing what was best for Merrill shareholders, which in this case was bringing ruin to B of A shareholders.

At one time, I suggested that he might have been a fairly good choice for Treasury secretary had John McCain won the election. He's certainly one of the brightest men in finance, and having someone like him at Treasury has a kind of Joe Kennedy-at-the-SEC, put-the-wolf-in-charge-of-the-chicken-coop quality to it (assuming he could have been persuaded to push Obama's agenda, which would have been unlikely).

Unfortunately, he's done such a superb job of shredding his reputation that I'm not sure what kind of position he could get in the Obama administration. Interior decorator?

One thing I will say: it makes sense that he spent $35,000 on a commode. I guess he wanted a fancy new home for his reputation.

© 2009 Gary Weiss. All rights reserved.

John Thain And That 'No More Capital' Prediction

It's hard to argue that Merrill Lynch needs capital -- and lots of it. One can't seriously dispute Merrill's decision to unload $30.6 billion of its mortgage-related debt at a loss.

What's interesting about this decision is not that CEO John Thain had to do it, but that his doing so is a stunning repudiation of the comments that he made to me (in my recent Condé Nast Portfolio profile), to other journalists, analysts, and the rest of the world a few months ago -- that he would not have to raise capital. In fact, he said that he had more than enough capital.

He didn't.

Thain wasn't lying. He honestly believed he would not have to do that, and events have overtaken him, and neither this very smart guy nor his staff of very smart guys has been able to do anything about it.

Merrill not only had to sell all those CDOs at a loss, but it had to sell $8.6 billion in new shares.

Thain is not a CEO who shoots from the hip. If he was taken by surprise by the depth of the problems in the mortgage market, it only one thing: things are getting worse, and worser, and worser......

UPDATE: I love the illustration in this Wall Street Folly item:



Such is the price of unwarranted optimism.

© 2008 Gary Weiss. All rights reserved.

John Thain and Merrill's Capital

There's been some intriguingly contradictory stuff coming out of Merrill Lynch recently concerning whether it is going to need to raise more capital. CEO John Thain has told just about everybody, including me for my recent Condé Nast Portfolio profile, that he has no plans to raise more capital.

At the earnings conference call he said, according to the Wall Street Journal blog Deal Journal:

“For those of you who like to blog,” said Thain rather archly, “We do not have any plans to raise any additional common equity and [chief financial officer Nelson Chai] actually agrees with that.”

This "Chai" reference was an apparent rebuttal to a CNBC report the previous day, which said Merrill may have to raise more capital and that Chai said, "I wish he didn’t say that," in reaction to Thain comments such as these to the Japanese media.

But was it really a rebuttal? Thain parsed his words carefully, and CNBC followed-up by saying it was right after all. The firm may sell preferred stock (which certainly is "raising capital" in my book).

All I can say is that if Merrill raises capital over the next few months -- by selling preferred stock, its stamp collection, or whatever -- it is going to hurt Thain's credibility.

© 2008 Gary Weiss. All rights reserved.

The Lowdown on John Thain

My profile of the new Merrill Lynch CEO, which appears in the May issue of Condé Nast Portfolio, is live on the Portfolio website.

It was discussed in the New York Times Dealbook blog yesterday.

© 2008 Gary Weiss. All rights reserved.