John Thain joins CIT Group

Controversial banking exec John Thain to lead struggling lender CIT Group. Do two wrongs make a right here?

By Kim Peterson Feb 8, 2010 2:39PM
John Thain. Credit:  (©Jonathan Fickies/Bloomberg/Getty Images)Two train wrecks of the financial world -- John Thain and CIT Group -- have joined forces. No wonder they waited until the Super Bowl started to announce this one.

John Thain became a poster boy for banker excesses as the economy went south. As the former head of Merrill Lynch, he asked for a $10 million bonus even after his company went off the rails. He spent $1.2 million in company money decorating his office with with an $87,000 rug and other indulgences.

And CIT Group? The business lender recently came out of Chapter 11 bankruptcy protection, in which it erased some $10 billion in debt -- including $2.3 billion in government aid.

Now, Thain will become CIT's chairman and chief executive. These two are perfect for each other.

But it makes some sense, too. Both have nowhere to go but up. Thain was fired shortly after Merrill was sold to Bank of America (BAC), and has since been trying to repair his tarnished name.

"John is radioactive," a former Citicorp chief executive told the Wall Street Journal last year. "I would guess any company with a public board would have a hard time hiring him."

Now, he gets his second chance, but it's not going to come easy. His salary is diminished: $500,000 in cash and $5.5 million in restricted stock (of which $3 million is unavailable for three years).

And he's going to be on a tight government leash, as regulators keep a very close eye on a lender that wiped out billions in taxpayer dollars. Bloomberg reports that CIT is still under constraints from its bailout and is shut out from the commerical paper market that was its traditional source of funding.

Thain appears to be bringing a newly humbled attitude to CIT. No fancy commodes or Persian rugs here. "I think I'll keep my office exactly the way it is," he told Bloomberg.

Can CIT -- and Thain -- recover? It's going to be a long road.

"If [Thain] can pull this off, he’s going to be the king,” a debt and equity analyst told Bloomberg.

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