crash of the titans Greed, hubris the last days of Merrill Lynch

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#1
Forbes

One of the wonders of the financial crisis that brought America's oldest financial institutions to the brink of collapse in 2008 is how quickly careers that took decades to build could be unmade and how challenging it can be to restore damaged reputations.

A number of examples pepper the cast of characters in "Crash of the Titans", a new book from Financial Times correspondent Greg Farrell. Take Stan O'Neal, the Merrill Lynch CEO heralded for making tough decisions after the tech bubble, then cast aside after letting a debt time bomb grow on the firm's balance sheet.

Or John Thain, the Goldman Sachs and NYSE Euronext golden boy who parachuted in to clean up Merrill's mess, only to leave under a cloud a year later before making a comeback as CEO of CIT Group.

Even Bank of America chief Ken Lewis would be tainted by the global meltdown that steered Merrill into the arms of his firm, and ultimately step down.

Farrell tells a story based on hundreds of hours of interviews that builds like a hurricane. A storm that began with a mounting pile of of toxic debt that ultimately resulted in massive losses and O'Neal's ouster, paused briefly after Thain took over in December 2007 and set about raising billions in capital.

"With the Christmas Eve announcement of a $6.2 billion capital raise, even [Merrill Co-President Greg] Fleming was able to relax for the first time in months," Farrell writes.

Of course, the calm was short-lived. By the summer the eye of the storm had passed and financial markets were back in disarray. Over the fateful September weekend when Lehman Brothers would file for bankruptcy Merrill was scrambling to find a dance partner that could keep it from the same fate.

The strength of "Crash Of The Titans" comes in the nearly 200 pages that detail that weekend, when Merrill would agree to a BofA takeover, and the months that followed before Thain's departure from the combined company in January amid criticism over bonuses paid out by the firm before the deal closed, a story that Farrell broke at the FT.

In his acknowledgments, Farrell notes that story was initially meant to highlight how Thain made all the right moves amid a litany of missteps by fellow Wall Street CEOs. Instead it detailed a chain of events that resulted in Thain, who had been lauded for managing to sell Merrill at a premium and touted as a potential Treasury Secretary if John McCain was elected president, losing his job.

Farrell's book takes another layer of varnish off Thain's Merrill career, pointing out that he was far more keen on an investment from the likes of Goldman than a sale that would cost Merrill its independence and his CEO title.

It was Merill's co-president, Fleming, Farrell writes, who pushed for a deal with Bank of America and exhaustively worked to get the premium Thain sought , $30 per share , in his negotiations with BofA's dealmaker Greg Curl, even though the Charlotte bank had all the leverage.

Fleming's reward? Burnout. As Farrell writes, Lewis offered Fleming the chance to replace Thain as the head of wealth management (essentially the remains of Merrill), an opportunity he turned down in favor of a return to Yale Law School as a lecturer.

Of course, Lewis wasn't long for his job either. By mid-2009 shareholders had stripped him of his chairman title and when he returned from a Labor Day vacation his appearance led to assumptions he had checked out. Seeing Lewis sporting a beard for the first time in his working life sent shockwaves through the organization. As Farrell relates in the book
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#1
Forbes

One of the wonders of the financial crisis that brought America's oldest financial institutions to the brink of collapse in 2008 is how quickly careers that took decades to build could be unmade and how challenging it can be to restore damaged reputations.

A number of examples pepper the cast of characters in "Crash of the Titans", a new book from Financial Times correspondent Greg Farrell. Take Stan O'Neal, the Merrill Lynch CEO heralded for making tough decisions after the tech bubble, then cast aside after letting a debt time bomb grow on the firm's balance sheet.

Or John Thain, the Goldman Sachs and NYSE Euronext golden boy who parachuted in to clean up Merrill's mess, only to leave under a cloud a year later before making a comeback as CEO of CIT Group.

Even Bank of America chief Ken Lewis would be tainted by the global meltdown that steered Merrill into the arms of his firm, and ultimately step down.

Farrell tells a story based on hundreds of hours of interviews that builds like a hurricane. A storm that began with a mounting pile of of toxic debt that ultimately resulted in massive losses and O'Neal's ouster, paused briefly after Thain took over in December 2007 and set about raising billions in capital.

"With the Christmas Eve announcement of a $6.2 billion capital raise, even [Merrill Co-President Greg] Fleming was able to relax for the first time in months," Farrell writes.

Of course, the calm was short-lived. By the summer the eye of the storm had passed and financial markets were back in disarray. Over the fateful September weekend when Lehman Brothers would file for bankruptcy Merrill was scrambling to find a dance partner that could keep it from the same fate.

The strength of "Crash Of The Titans" comes in the nearly 200 pages that detail that weekend, when Merrill would agree to a BofA takeover, and the months that followed before Thain's departure from the combined company in January amid criticism over bonuses paid out by the firm before the deal closed, a story that Farrell broke at the FT.

In his acknowledgments, Farrell notes that story was initially meant to highlight how Thain made all the right moves amid a litany of missteps by fellow Wall Street CEOs. Instead it detailed a chain of events that resulted in Thain, who had been lauded for managing to sell Merrill at a premium and touted as a potential Treasury Secretary if John McCain was elected president, losing his job.

Farrell's book takes another layer of varnish off Thain's Merrill career, pointing out that he was far more keen on an investment from the likes of Goldman than a sale that would cost Merrill its independence and his CEO title.

It was Merill's co-president, Fleming, Farrell writes, who pushed for a deal with Bank of America and exhaustively worked to get the premium Thain sought , $30 per share , in his negotiations with BofA's dealmaker Greg Curl, even though the Charlotte bank had all the leverage.

Fleming's reward? Burnout. As Farrell writes, Lewis offered Fleming the chance to replace Thain as the head of wealth management (essentially the remains of Merrill), an opportunity he turned down in favor of a return to Yale Law School as a lecturer.

Of course, Lewis wasn't long for his job either. By mid-2009 shareholders had stripped him of his chairman title and when he returned from a Labor Day vacation his appearance led to assumptions he had checked out. Seeing Lewis sporting a beard for the first time in his working life sent shockwaves through the organization. As Farrell relates in the book
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