Look, if former Merrill Lynch CEO Stan O'Neal had known that the bank he ran was liable for $45 billion in crappy collateralized debt obligations, he would have done something about it, he tells William Cohan in Fortune this week, in his first interview since he was forced to resign in October 2007. The problem was that he didn't know. Why? Because the CDOs were hiding.
The magnitude of the problem "hadn't been apparent in ways it should have," he told the magazine.
That is to say, they were on the books, but it wasn't until August of 2007, when he was vacationing at his home in Martha's Vineyard, that O'Neal decided that given everything that was going on, he might want to actually crack said books open and take a look at what was going on. And when he did, "a few things became clear," he said. Namely, that neither he nor anyone else at the firm had had any idea what they were doing.
"One is the complexity of it was far beyond what I would have imagined. Second, the number of people who actually understood the aggregated view of this — not just in terms of size and scale but the potential complications associated with it — were few and far between."
Do you get that? First of all, it wasn't really Stan O'Neal's fault that he had allowed his firm to accrue an ungodly amount of toxic securities through sheer negligence. The problem was the problem. Not that Stan O'Neal didn't feel bad about it. He did feel bad. Ball-crushingly bad.
The CDO problem in 2007 left Merrill, as O'Neal puts it, like "a fighter in the middle of the ring with your hands tied behind you and an opponent, whenever he chose, could just whale away on you, punch you right in the face. And there was no referee, so he could kick you in the balls, give you an elbow to the chin and you could do nothing except stand there until he decided he was tired or finished or beneficent or whatever it was and turned away and walked out of the ring."
Not that he didn't stand up and fight! He did! He tried to sell the firm to Bank of America, but this other guy was like, "No, Ken Lewis is an asshole." So he was just like, "Fine, I'll take my $160 million exit package and go. And then he did.