Ousted banker John Thain has been brought in from the cold with a new role as chairman and chief executive of US commercial lender CIT worth up to $7.5m (£4.8m) a year.
The former Merrill Lynch boss, who oversaw the bank’s acquisition by Bank of America (BoA), will receive $500,000 in cash, $2.5m of restricted CIT stock with a holding period of one year and the remaining $3m in stock restricted for three years. He will also be eligible for a discretionary bonus of $1.5m in performance related restricted shares.
He has been appointed to complete the firm’s transition to a more streamlined lender for small and medium-sized businesses (SMEs). Thain will take over from CIT’s interim chief executive Peter Tobin.
He was set to head the investment banking division at newly merged BoA Merrill Lynch but was forced out after the extent of Merrill’s losses were revealed. Ken Lewis, the former chief executive of BoA, the highest ranking banker to face charges in the wake of the financial meltdown, is believed to
have personally demanded Thain step aside.
CIT suffered massive losses after exposure to the sub-prime mortgage market.
It filed for bankruptcy in November, shedding $10bn of debt and securing a $4.5bn loan propped up by bondholders. It emerged from bankruptcy via a government bailout in December.
Thain said: “I am pleased to have the opportunity to lead the newly reorganized CIT. The company’s numerous market-leading positions are evidence of the resiliency of the franchise and its unwavering commitment to its customers.”
He added: “Much has been accomplished in recent months to position CIT for renewed success. We will build upon this progress and work even harder to support small and mid-market businesses.”
THAIN was Merrill Lynch boss at the time of its sale to Bank of America (BoA). He negotiated the infamous deal for $29 per share, a 70 per cent premium over its market price, which valued the brokerage at a staggering $50bn.
He was widely expected to be made head of the new organisation’s investment banking wing but fell out with then-BoA chief executive Ken Lewis when news emerged of Merrill’s $16bn losses and $3.6bn bonus payout in the fourth quarter of 2008.
Lewis claims Merrill hid the mounting losses and bonus payments from BoA during the takeover process.
Before landing the job at Merrill, Thain had been favourite to land the chief executive role at Citi. At the time he was chief executive at NYSE Euronext as well as being a former
president at Goldman Sachs
However, he was poached from under the noses of the bank by Merrill, where he replaced ousted chief executive Stan O’Neal.
Thain was the chief executive of the New York Stock Exchange from 2004 to 2007. He also worked at Goldman Sachs from 1985 to 2004 where he was head of the mortgage desk and
latterly chief operating officer.
He courted controversy when he spent $1.2m redecorating his Merrill office, including $35,000 on a toilet.