The Five Dumbest Things on Wall Street This Week
1. Last Stop on the Bus
Stan O'Neal finally got the hook at Merrill Lynch (MER).
The brokerage firm's CEO stepped down Tuesday. Merrill directors had started pushing for O'Neal's ouster after the firm was forced last week into an $8 billion writedown of subprime mortgage loans and collateralized debt obligations. O'Neal didn't help matters by (not so) secretly pursuing a merger with Wachovia (WB) that would have lined his pocket with millions of dollars in change-of-control payments.
News leaks over the weekend made it clear that O'Neal was finished, but his departure was delayed while lawyers hammered out the terms of his departure. And for O'Neal, the wait was well worth it.Despite the huge writedown, Wall Street's expectation that Merrill still faces billions of dollars of future CDO-related losses, and the fact Merrill shares have lost nearly a third of their value this year -- the exec will walk away with a $160 million slug of stock, pension money and deferred compensation. This on top of the $48 million he pulled down last year and his $37 million payday in 2005. Plus, he gets an office and an assistant for three years. O'Neal gets his sweet going-away package even though he steered Merrill into the teeth of the worst credit crunch in a generation. On his watch, the firm became the biggest underwriter of CDOs -- the esoteric debt whose collapse has left Wall Street firms with billions of dollars in losses this fall. Adding to the absurdity, the deal allows O'Neal to say he "retired" from Merrill. The wording allows O'Neal to collect all his winnings while making his departure sound orderly -- a quaint notion belied by the fact that Merrill hasn't yet lined up a new CEO to take his place. Indeed, former Merrill chief Dan Tully complained to Bloomberg this week that O'Neal's ruthless elimination of potential rivals left the firm shorthanded. He said that during his reign Merrill's board spent countless hours anticipating unforeseen executive changes -- an exercise he referred to as the "hit-by-the-bus scenario." O'Neal had his own plan, though, and it didn't require any long meetings or elaborate flow charts. He just pushed Merrill shareholders under the bus. Dumb-o-Meter score: 95. Tully previously called O'Neal's $8 billion writedown mess "sickening."
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