Why Thain Had to Leave Bank of America

The only real surprise about John Thain's abrupt departure is the timing.After a late Thursday morning meeting with his new bosses at Bank of America, the former head of Merrill Lynch was apparently persuaded to resign. BofA chief Kenneth Lewis probably should have arranged a better way to handle the matter, but it's also a good thing that Thain is going. Lewis didn't have much choice.

Thain had his own problems with both management and hubris. A long-time Goldman Sachs executive with degrees from Harvard and MIT, Thain became CEO of Merrill in 2007 just as the ship started leaking. Obviously he couldn't prevent disaster for one of America's best-known names in retail investing that got caught up in subprime lending.

When the financial crisis became a major storm late last summer, Lewis considered buying Merrill Lynch, as he had likewise troubled Countrywide Financial, a "patriotic" duty. Yet Lewis is under intense pressure himself because of suspicions that he may have known in early December about the big loss ($15.4 billion) that Merrill was about to post for the fourth quarter just about the time BofA shareholders approved the Merrill buy.

Also, about that time, Thain was foolishly holding out for a bonus from his Merrill board -- a move that made him and his firm look ridiculous. When BoA took over, Thain continued his spoiled child behavior. He reportedly decorated his office to the tune of more than $1 million, insisted on keeping a ski house in Vail and demanded to go to the glitzy annual confab of global movers and shakers at Davos, Switzerland even though BofA had asked him to skip it.
There was never going to be room at the top for both Lewis and Thain and Thain's departure was going to occur sooner or later. In this case, it turned out to be sooner.