Monday, October 29, 2007

Nice Work If You Can Get It

LATimes (10.29.07):
"The beleaguered head of Merrill Lynch & Co. has reportedly decided to step down and leave the firm, becoming the first chief of a Wall Street investment bank to be done in by the sub-prime mortgage crisis."

Stan O'Neal, who endured withering criticism last week because of Merrill's enormous losses on mortgage-related securities, will quit his post as soon as today, according to a report on the Wall Street Journal's website."

Merrill CEO said bound for exit

Stan had a very bad week last week. "On Wednesday, Merrill wrote down $7.9 billion in losses caused by beaten-down sub-prime and other mortgage-related securities, the largest such hit taken by any Wall Street firm."

A very, very bad week. "Including losses on bonds related to troubled private-equity deals, Merrill's total write-down was $8.4 billion and its third-quarter net loss was $2.2 billion."

He won't be leaving empty-handed, however. NYTimes (10.27.07):

"Merrill Lynch’s directors may be weighing E. Stanley O’Neal’s future, but one thing is already guaranteed: a payday of at least $159 million if he steps down. Mr. O’Neal, the company’s chairman and chief executive, is entitled to $30 million in retirement benefits as well as $129 million in stock and option holdings, according to an analysis by James F. Reda & Associates using yesterday’s share price of $66.09."

The Price of Any Departure Will Be at Least $159 Million

Stan jumped feet first "into lucrative businesses like the packaging of subprime mortgages and other complex debt securities." It worked for a while as Merrill posted "a string of blow-out quarters — and blow-out paydays."

Then came the day of reckoning.

"'I lay the blame at the foot of the board,' Frederick E. Rowe Jr., a money manager and president of Investors for Director Accountability. 'He was paid a tremendous amount of money to create a loss that is mind-boggling, and he obviously took risks that should never have been taken.'"

But, as they say, luck's as good as brains. As long as it lasts.

And last week, Stan's luck ran out.



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