September 19, 2008

View From Lodi, CA Pittsburgh, PA: Looking Back At Merrill Lynch

Many years ago, I walked out of Merrill Lynch corporate headquarters at 1 Liberty Plaza and left Wall Street entirely.

I moved as far away as I could and still remain in the lower 48—Seattle, Washington.

To this day, people ask me what happened. I was an officer, earned an excellent salary, had a generous expense account and a corner office with a panoramic view of the Hudson River.

Looking back, I count five reasons.

First, I had grown increasingly uncomfortable with most of my peers. The simple fact—true then and still true today—is that the bankers, lawyers and traders who gravitate to Wall Street work for money.

Colleagues who were asked to list the most important thing in their lives would reply that it was their family or their faith. But really, it was money. No one works on the Street for its aesthetics.

Second, I had reached a period in my career where, after a series of promotions, I was swimming with the sharks.

Doing deals and bringing in revenue to the firm had been enough at the beginning. But eventually, my early successes led to becoming a department head with a large staff reporting to me.

By then I was a visible target. Insecure executives above me were nervous that I might outshine them. And my overly-eager underlings wanted my job.

Like everyone else who approaches the top rungs of the corporate ladder, survival became key.

That meant being willing to out-maneuver the hard chargers around me. I had two options: scheme to put the skids to my superiors or let myself be undercut by my subordinates.

Neither option held any appeal.

Third, and closely linked to reason two, I was increasingly disappointed in myself.

I silently rooted for my superiors to fail. Their downfall could accrue to my benefit. Wishing bad things to happen to others is an ugly way to live.

Fourth, I had over the years already avoided several corporate reorganizations and purges. No one dodges them all.
Fifth, my father, a businessman all his life, died. During many searching bedside conversations we had throughout his prolonged illness, he encouraged me to step away and live a more fulfilling life.

I can’t say that I never regretted my decision. The last time I checked, the job I once held paid a seven-figure salary—and not just barely seven figures either!

Another wonderful feature of the high life that I look back on wistfully was the freedom to order World Series tickets and have the bill sent to accounting.

Despite the perks, however, I would make the same decision today.

This week’s events—the Bank of America’s acquisition of Merrill Lynch, Lehman Brothers’ Chapter 11 proceedings, and the last minute federal rescue of AIG re-confirms my judgment.

The unthinkable happened. Merrill Lynch, my former employer, Wall Street’s giant and the dominant securities firm for a century, is gone.

What precipitated Merrill’s demise was moral bankruptcy.

In 2007, while America tried to cope with growing financial uncertainty, the big boys had no worries.

While your savings vanished, your home equity plunged and the value of your investments dwindled, Merrill Lynch CEO John Thain earned over $80 million . Thain worked at the Merrill for less than three weeks. His short time aside, Thain was according to the Associated Press America’s most highly paid executive.

On December 3, 2007 Thain brought in his close friend Nelson Chai, appointed him executive vice president and chief financial officer. Chai’s 2007 salary: $2.5 million for less than a month on the job.

In August 2008, Thain added his former Goldman Sachs associate Thomas Montag to the Merrill Lynch roster for $40 million.

If you really want to feel outrage, think about this: just prior to the Bank of America acquisition, over the last four quarters Merrill Lynch wrote down $52 billion in assets, posted cumulative losses of more than $17 billion and had to raise nearly $30 billion in capital to stay afloat.

The Merrill Lynch board forced the man responsible, former chief executive officer Stanley O’Neal, to resign last October. Before being shown the door, O’Neal received a $160 million exit package.

Today, O’Neal is sitting on his fortune playing golf, no doubt at one of the finest resorts in the world. Given today’s real estate values, O’Neal could use his golden parachute to gobble up his native Alabama.

In the meantime, who knows?

Maybe one of the 24,000 employees dismissed under O’Neal’s watch would be willing to serve as his caddy.

Joe Guzzardi [email him] is a California native who recently fled the state because of over-immigration, over-population and a rapidly deteriorating quality of life. He has moved to Pittsburgh, PA where the air is clean and the growth rate stable. A long-time instructor in English at the Lodi Adult School, Guzzardi has been writing a weekly column since 1988. It currently appears in the Lodi News-Sentinel.