Thain Ousted From Merrill-BofA By Lewis

John Thain's recent firing as head of the Merrill Lynch units of BofA seems to reinforce the sentiments I expressed only last month, in this post. I wrote,

"Now, Thain is also remembered for gulling investors in December and the first quarter of 2008 to put money into the disintegrating brokerage firm, then claiming they didn't need to raise any more capital. To me, Thain is tarnished by some of what he did early on at Merrill, and for even leaping into the mess. I think it smacks of too much ego and too little perspective on the unfolding disaster that was in process a year ago.

Maybe I'm alone in this view, but I think Thain's time at Merrill has diminished his reputation and raises questions about his judgment."

My view hasn't changed. And I've held it since back in late 2007, when, in this post, I wrote,

"Merrill represents the last of an otherwise dead model, the retail wire house. Sure, Merrill bought and grafted on investment banking in the past decade. But it hasn't internalized the risk management skills which seem to have prevented Goldman Sachs, Morgan Stanley, and Blackstone from suffering the same losses during this year's financial crises.

For an experienced, capable outsider, though, the job might ultimately hold more risk than opportunity."

To me, this whole affair continues to be an embarrassment and the downfall, in time, of both CEOs- Thain and Lewis.

Sure, this week's revelations of Thain's expensive renovation of his office at Merrill amidst its hemorrhaging losses is quite a statement to his lack of judgment, even at micro-levels. That sort of arrogance and waste looks really bad in retrospect. It's hard to believe the stories are only surfacing now.

But, judging from the recent editions of the Wall Street Journal, and comments on CNBC, others are finally seeing what I did over a year ago. Thain didn't perform proper due diligence on Merrill, in so great a rush was he to prove himself one more time. His ego got the better of him.

But Lewis looks bad for throwing over his own common shareholders, under government pressure. Not to mention his first mistake, which was even offering to buy Merrill.

I thought he should have simply hired their brokers, if he really had to have them, rather than buy the whole mess. Merrill never had a particularly stellar investment banking team, nor trading function, for that matter. And Lewis wouldn't know how to manage those anyway.

But, given that he mistakenly wants a full service, full cost brokerage force, simply luring them from Merrill, or, better, picking them off from a bankrupt Merrill, or one taken over by another firm, would have been cheaper and simpler.

But, for now, Thain is the goat. And I agree that it might be a long time before he is well-regarded again in financial services. For now, it's probably time for him to open that small hedge fund and take money from a few friends, so he can hang out a shingle and expense some of his business activities for the coming few years.