Thain to lead CIT? Look out
If you're an investor in CIT, beware. This is the guy who led Merrill Lynch to the cliff.
The old-boy network is alive and well.
The hot rumor of the day has John Thain being named CEO of CIT Group.
Clearly retiring CIT CEO Jeff Peek might favor such a move. Peek and Thain worked together at Merrill Lynch. Or, should I say, helped drive Merrill Lynch off a cliff?
Thain is a lightning rod of the financial crisis, for good reason.
As CEO of Merrill, he claimed all was well with the company during the initial stages of the financial crisis in 2008. And, yes, things were good for executives, who received big bonuses and sweet contracts while the firm was nearing collapse.
If not for a Federal Reserve-arranged sale to Bank of America, Thain's Merrill Lynch might have suffered the same fate as Bear Stearns and Lehman.
If I were on the CIT board, I wouldn't look at that record and say, "This guy's our man."
The large lending company recently emerged from bankruptcy. Does the way back involve naming a guy who took Merrill to the cliff?
One thing is certain: Bonuses for executives would likely grow under a Thain regime, whatever happens on the bottom line.
Of course, with CEOs, just having experience sometimes seems to matter more than the quality of that experience. Consider Robert Nardelli, who made a mess at Home Depot, then found a home in the executive suite at Chrysler. How's Chrysler doing now?
If you are an investor in CIT, you have to be concerned. It is comforting to see CIT’s stock down 3.5% today, perhaps on the thought of Thain's becoming CEO. Maybe shareholders are speaking.
I wouldn't want to hold CIT stock if the company is looking to the likes of Merrill Lynch for leadership. Here is a free copy of my Top 10 Stocks to buy for 2010 instead.
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