John Thain lands atop CIT
Former Merrill Lynch CEO will earn $500,000 annually
Last Updated: Monday, February 8, 2010 | 2:38 PM ET
The Associated Press
John Thain is getting a second chance.
CIT Group Inc. tapped the former Merrill Lynch CEO to become its chairman and chief executive.
Merrill Lynch executive John Thain speaks during a news conference in New York in September 2008. Thain was named to head CIT Group Inc. on Monday. (Bebeto Matthews/Associated Press) Thain brokered Merrill's sale to Bank of America as the credit crisis peaked in the fall of 2008, but was forced to resign after the deal closed because of controversy over bonus payments and mounting losses at the investment bank.
CIT, one of the nation's largest lenders to small and mid-sized businesses, is betting Thain can repair his image and the company's after a difficult 2009. CIT went through bankruptcy reorganization late last year after it was unsuccessful in trying to restructure its debt.
Thain will try to revitalize a commercial lender that was among the hardest hit by the recession and credit crisis. CIT Group, which lends to more than 3,000 businesses including supermarkets and department stores, was forced into bankruptcy after failing to raise cash to pay off outstanding debt.
The more than 100-year-old company also was hurt by mounting loan losses as more customers fell behind on repaying loans during the recession.
Thain, 54, took over Monday. He replaces interim CEO Peter Tobin, who will remain on CIT's board of directors. Tobin had been serving as CEO since Jeffrey Peek retired Jan. 15.
New York-based CIT will pay Thain an annual cash salary of $500,000 US. He will also receive $5.5 million US in stock annually, of which $2.5 million US will be subject to a one-year holding period. The remaining $3 million US cannot be sold for three years.
Thain could also receive up to $1.5 million in bonuses based on the performance of the company. The board will determine whether to award the performance-based bonuses.
Criticized during Merrill Lynch tenure
As chairman and CEO of Merrill Lynch, Thain's deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis.
But he was criticized for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.
Thain resigned as head of global wealth management of the combined company in January 2009, after news of the bonus payments first surfaced.
Bank of America Corp. last week agreed to settle a case with the Securities and Exchange Commission over claims it misled shareholders about the bonuses and more than $15 billion in fourth-quarter losses at Merrill to ensure the deal would be approved.
New York Attorney General Andrew Cuomo filed civil fraud charges against Bank of America and its former CEO Ken Lewis on similar grounds. Joe Price, who at the time of the deal was Bank of America's chief financial officer but now heads consumer banking, was also charged.
Thain was not charged with any wrongdoing.
Thain inherits a company that in addition to its lending activities is the third-largest railcar leasing firm in the U.S. and the third-largest in airline financing globally, according to its website.
"Much has been accomplished in recent months to position CIT for renewed success," Thain said in a statement. "We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs."
CIT moved through bankruptcy in just six weeks because its key bondholders had already approved a reorganization plan. It was able to cut its total debt by $10.5 billion US and deferred debt maturities for three years.
The same month it emerged from Chapter 11 it made plans to start lending again, committing to fund $500 million US in new government-guaranteed loans to small business customers in 2010.
Common stock holders and the government lost their investments when CIT filed for bankruptcy protection. The Treasury Department had given CIT $2.3 billion US in loans as part of its $700 billion US financial bailout plan.
The government declined to provide CIT with a second bailout when the company was trying to find new funding sources last summer before filing for bankruptcy protection.
Thain has also served as CEO of the New York Stock Exchange and as president and chief operating officer at Goldman Sachs Group Inc.
