Posted on 08/04/2008 8:05:29 PM PDT by DeaconBenjamin
John A. Thain said he had to do something to stop the bleeding at Merrill Lynch.
A week after he stunned Wall Street by selling billions of dollars of toxic mortgage investments for pennies on the dollar, Mr. Thain defended his decision on Monday, saying he needed to take decisive action to shore up the Wall Street giant and morale among its employees.
“We have over 60,000 people working every day,” Mr. Thain said in an interview after eight tumultuous months as chief executive of Merrill. “All the efforts of these people were overwhelmed by the write-downs in the mortgage-related assets.”
Mr. Thain disputed notions that he misled investors about his intentions to raise capital. And he said he sold the mortgage assets, a difficult but necessary step, because he did not know if Merrill would have a similar opportunity again. “The buyer might have gone away,” he said. “The prices of the assets might have declined.”
Mr. Thain, brought in to fix the mistakes of his predecessor, is now facing criticism over his decision to raise more capital — a move that caused eye-popping dilution for Merrill’s shares.
All told in July, Mr. Thain negotiated seven large-scale deals at Merrill, including what the firm says was the largest secondary offering of stock ever, at $9.8 billion.
* * *
Mr. Thain has taken the most drastic steps of any Wall Street chief to move beyond the credit squeeze. The company’s fire sale of some $31 billion in mortgage assets known as collateralized debt obligations, or C.D.O.’s, at a price of 22 cents on the dollar could even be an impetus for similar moves by Citigroup, Lehman Brothers or other firms.
(Excerpt) Read more at nytimes.com ...
It was actually 5 cents on the dollar - Merrill will only get 22 cents if the buyer can turn around and re-sell the CDO's. Kind of like a consignment sale.
The man’s a liar. Remember this when a ML broker phones you.
Yikes...harsh words...what brought that on?
And worse than that, if the buyer doesn’t complete the deal within 60 days, the only recourse Merrill has is to take the CDO’s back.
So in that case, they’ll have forced a mark-to-market on themselves (and other holders of similar CDO’s) and have nothing to gain from it other than the $0.055/dollar-notational.
Idiots.
Interesting idea. Lock in the loss. Stop the bleeding.
This has to happen or else the economy will do a slowwww bleed for years like Japan.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.