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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ajtj99 who wrote (9751)	8/11/2008 6:17:17 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

MER--Former Merrill CEO Tully Commends Thain for Purging `Dynamite' By Bradley Keoun Aug. 11 (Bloomberg) -- Daniel Tully, who tripled Merrill Lynch & Co.'s stock price while chief executive officer in the 1990s, says current CEO John Thain was right to liquidate $31 billion of mortgage securities for a fifth of their face value. ``It's good to have it behind us and not play the market with the so-called dynamite,'' Tully, 76, said in a telephone interview last week from his home in Darien, Connecticut. ``The organization will go back to the basics, and we will once again be very profitable.'' Tully's support echoes comments last month by Winthrop Smith Jr., a former head of Merrill Lynch's international brokerage and the son of a former Merrill CEO. The two executives criticized former CEO Stan O'Neal in the week before his ouster last October for damaging the culture of the New York-based firm by eliminating senior executives and failing to create a workable succession plan. Thain, who took over in December, dumped the mortgage- related collateralized debt obligations, known as CDOs, for 22 cents on the dollar and sold $9.8 billion of stock to bolster capital. Less than two weeks earlier, Thain assured analysts that Merrill had enough capital and that he wouldn't do ``dumb things'' like selling CDOs too cheap. ``I think the questioning of his credibility is off to left field,'' Tully said in the Aug. 6 interview. ``When he said we don't have to raise additional capital, I would guess that everyone in the world should have realized that that meant at that particular moment in time, and not if the markets deteriorated, which they have.'' Four Decades Tully who started out as a stockbroker and spent four decades helping build Merrill into what is now the third-biggest U.S. securities firm by market value, served as chairman for four years before retiring in 1997. ``Thain is doing a hell of a job,'' Tully said. ``He inherited a difficult situation, and he is doing the best that he can.'' Merrill spokeswoman Jessica Oppenheim declined to comment. Smith, in a July 29 interview, called Thain's CDO sale ``a good move'' that would remove ``a lot of risk, if not most of the risk from the balance sheet.'' Hires such as Tom Montag, a former Goldman Sachs Group Inc. executive who joined last week as Merrill's new trading chief, will be helpful in restoring profitability, Tully said. Merrill has posted four straight quarterly net losses totaling almost $19 billion. `Great Reputation' ``Over the years Merrill was always hiring from the competition, and the competition was hiring from Merrill, and you filled your spots with the best people that you can,'' Tully said. ``I don't know Mr. Montag, but I hear he's got a great reputation. Some of the people that are gone were identified with O'Neal and should have gone.'' More than two dozen senior executives and traders have departed since Thain, also a former Goldman executive, took over, and six of 11 members of his executive management team are newcomers to the firm. Tully said Thain is committed to ``melding the Goldman policies and Merrill policies, which were pretty close anyway.'' ``He's going to build upon those, which is great, and that's how you win the ultimate battle,'' Tully said. ``I applaud bringing in new people that he has confidence in and feels can help turn the ship upward and then onward again.'' To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net. Last Updated: August 11, 2008 12:28 EDT