Every year on New Year's eve they count down the seconds before dropping the ball in New York City's Times Square. Down here at the Five Dumbest Lab, we have a year-ending celebration of our own: We count down the 10 biggest moments on Wall Street in which a CEO or company dropped the ball.
Before we start ticking down our favorite flubs from 2009, however, we want to wish all of our readers a happy and healthy 2010. Thanks for all your suggestions, tips and feedback. We hope to see you all in the new year, but for your own sake, not on one of our dumbest lists.
Now without further ado, here is Part 1 of the 10 Dumbest Things on Wall Street This Year.
10. Thain Dethroned
Originally published 1/30/09
Once the king of Wall Street, John Thain has been dethroned in more ways than one.
The former Merrill Lynch CEO responded to embarrassing accusations surrounding his hasty departure from
Bank of America
(BAC - Get Report)
Monday by blaming the bank's current troubles on BofA management, his predecessor at Merrill, and the press.
Bank of America's recent acquisition of Merrill Lynch has -- thus far -- been nothing short of disastrous, with Thain having a big hand in the misery-making.
Thain, who formerly held the titles of CFO at
(GS - Get Report)
and CEO of
, was dismissed from Bank of America last Thursday amid charges that Merrill Lynch hid fourth-quarter losses in December, accelerated employee bonuses at Merrill prior to the Jan. 1 closing of its deal with BofA and spent lavishly to redecorate his office, including the purchase of a $35,000 commode.
Tension between Thain and BofA CEO Ken Lewis reportedly had built since BofA learned in December that fourth-quarter losses at Merrill were going to be much worse than expected. Those losses almost led BofA to back out of the deal, until the federal government pledged help to absorb the hit.
In Monday's memo addressed to Merrill employees, Thain said Merrill consulted with BofA about the bonus pool's size, composition and timing. He said that the total bonuses paid had fallen 41% from their 2007 levels. Thain also addressed Merrill's $15.31 billion fourth-quarter loss, saying the losses were incurred on "legacy positions" and that BofA had "daily access to our P&L, our positions and our marks."
The one issue where Thain did not deflect blame elsewhere was the $1.2 million he reportedly spent on upgrading his office. Thain promised to reimburse the company for the extravagant expenditures, which he called "a mistake in the light of the world we live in today."
Excuse us, John, but if you pull back those $28,000 Egyptian silk curtains you just bought, you will see that today's world is quite similar to the one you inherited when you replaced Stan O'Neal at Merrill in November 2007.
Merrill's fourth-quarter 2007 pretax loss from continuing operations was $14.9 billion. Merrill Lynch's net loss for the full year 2007 was $7.8 billion, or $9.69 per diluted share, and, just like now, employees were being laid off by the boatload.
The "light of the world" has not changed. And neither have you.
Take your excuses and flush them down your $35,000 toilet. Then go away.
Five Dumbest Final Thoughts -- Thain's commode made Dennis Kozlowski's $6,000 shower curtain look cheap.