Ex-Merrill chief to head lender CIT

NEW YORK - John Thain, the ousted chief of Merrill Lynch, is to lead CIT Group, the commercial lender that emerged from bankruptcy in December, after a nearly four-month search for a replacement.

Thain, 54, becomes chairman and chief executive officer immediately, CIT said yesterday.

The century-old lender had been led by Jeffrey Peek, another former Merrill Lynch executive, from July 2004 until January 15, when he stepped down and board member Peter Tobin was named interim chief executive.

The job restores Thain to the top of a public company more than a year after he was pushed out by Kenneth Lewis, then chief executive of Bank of America, which agreed to buy Merrill during the 2008 financial crisis.

Thain inherits a company that was crippled by Peek's foray into sub-prime lending before the bankruptcy.

CIT still operates under constraints tied to a federal bailout in 2008 and is shut out from the commercial paper market, its traditional source of funding.

"This is a company that's over 100 years old and its core business is lending to small- and medium-sized companies," Thain said yesterday.

"If we're going to get the US economy to continue to grow, if we're going to create jobs, then we need to have this kind of a company do well."

Before joining Merrill Lynch in December 2007, Thain ran NYSE Euronext, the company that owns the New York Stock Exchange, and spent about 24 years at Goldman Sachs, the most profitable securities firm in Wall Street history.

CIT provides business loans to more than 3000 companies and is the third-largest railcar-leasing and aircraft-financing firm in the US, according to its website.

With 4480 employees at the end of September, CIT is a fraction of the size of Merrill Lynch, which had more than 64,000 when Thain arrived.

Thain's pay at CIT Group is subject to compensation restrictions imposed on management of companies that have received funds from the Troubled Asset Relief Programme, or TARP.

He will receive US$500,000 in salary and US$5.5 million in shares, of which $2.5 million is restricted for one year and US$3 million is locked up for three years, said a person familiar with the matter.

He will also be eligible for a US$1.5 million "discretionary" payment in restricted shares, contingent on his performance, that will vest after two years and can't be sold for three years, the person said. CIT can claw back the US$1.5 million payment under certain conditions.

Merrill Lynch agreed to pay Thain US$44 million in bonus, salary and stock when he took over that firm, which he arranged to sell less than a year later to Bank of America.

Thain said CIT could exit TARP soon by extinguishing "contingent value rights" the Government received during the bankruptcy.

For CIT, Thain must find lower-cost sources of funding, lift restrictions on its banking unit and win over regulators wary after the bankruptcy filing wiped away a US$2.3 billion Treasury Department stake.

CIT, unable to win a second round of government assistance, was forced into bankruptcy after posting losses from sub-prime and student lending for 10 consecutive quarters totalling more than US$6 billion.

The company has been trying to move its small-business lending, trade finance and vendor finance operations to CIT's Salt Lake City banking unit so it can use deposits as a source of cheaper funding for loans.

- BLOOMBERG