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NYSE's John Thain to lead ailing Merrill Lynch

John Thain must guide Merrill through an unfolding credit crisis. John Thain must guide Merrill through an unfolding credit crisis.
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Associated Press / November 15, 2007

NEW YORK - In the game of Wall Street musical chairs, one of the biggest seats has just been taken.

Merrill Lynch & Co. named the New York Stock Exchange's John Thain to lead the world's biggest brokerage just two weeks after it ousted Stanley O'Neal for presiding over the biggest quarterly loss in its 93-year history.

Thain - also thought to be a candidate to become chief executive of Citigroup Inc. after the departure of Charles Prince - faces a tough job in Merrill's top seat.

The 52-year-old will need to lean on his reputation as a consensus builder to win the allegiance of Merrill's army of some 16,000 brokers worldwide. Many felt betrayed by O'Neal, who was forced out after the brokerage reported a $2.24 billion third-quarter loss.

The biggest challenge: Help guide Merrill Lynch through the unfolding credit market turmoil, which threatens Wall Street's biggest investment houses. The firm took a $7.9 billion write-down during the third quarter - an amount that shocked investors because the firm originally pegged the amount at $4.5 billion.

The crisis shows no sign of abating; analysts expect another $4 billion charge this quarter.

Alberto Cribiore, Merrill Lynch's interim nonexecutive chairman who headed the search to find a new chief executive, said Thain is "the right person."

He already has widespread support, from academics to Wall Street analysts. He's viewed as one of the smartest men on the Street after a career at Goldman Sachs Group, where he rose from a bond trader to chief operating officer.

"I think John is a very good candidate for the future," said Win Smith Jr., a former chairman of Merrill Lynch International whose father was among Merrill's founders. "He has a great background, did a good job stepping into NYSE when it had troubled times, and comes out of a firm that has a very strong culture. He can help bring the pride back."

Indeed, the transformation he made at NYSE might serve as the blueprint for how to do the same at Merrill Lynch - which faces both media scrutiny and troubled books. At the NYSE, he took over after Richard Grasso was ousted over his controversial pay package.

Not only was he able to rebuild confidence of NYSE board members and workers, but put the exchange on the right track. His acquisition of electronic trading platform Archipelago Holdings Inc. set NYSE up to go public, and then Thain snapped up Euronext to become the world's first trans-Atlantic stock exchange.

He faces the same major challenges at Merrill Lynch.

"You might think he has a tough job ahead of him at Merrill Lynch, don't forget he had the same thing facing him at the NYSE when it was controlled by the old member firms," said Roy Smith, who worked with Thain at Goldman and is now a professor of finance at New York University's Stern School of Business. "He won them over, and now they're among his greatest admirers."

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