Merrill Lynch CEO John Thain Has a Problem

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“We believe that we are in a very comfortable spot in terms of our capital,” Merrill Lynch CEO John Thain told analysts July 18, after the bank wrote down $9.4 billion and sold a 20 percent stake in Bloomberg. Investors were likely cheered to hear that. The worst was over! Except that last night, after the markets closed, Thain whispered into the darkness that, er, actually Merrill is writing down $5.7 billion more and also — just for good measure — would also like to offer $8.5 billion worth of shares to anyone who is interested. They could even sell $9.8 billion if that suits anyone's fancy! Anyone? So, yeah, they are not exactly "comfortable," unless you are the sort who defines a Judas chair as comfortable. To be fair, there are a lot of those sorts on Wall Street, especially, probably, among shareholders in banks.

The quick turnaround throws Thain's credibility into question, especially since, as Reuters points out today, he's made these kind of statements a lot since taking the reins in December. For instance:

"We're very confident that we have the capital base now that we need to go forward in 2008." (January 18, 2008 — Thain as quoted by the New York Times)


"...Today I can say that we will not need additional funds. These problems are behind us. We will not return to the market." (March 8, 2008 — Thain in an interview with France's Le Figaro newspaper)

Emphasis ours. Reuters counts ten instances of this, by the way. Awkward.

FACTBOX: Quotes from Merrill's Thain on capital needs [Reuters]
Merrill Aims to Raise Billions More [WSJ]
Related: The Blame's on Thain