John Thain, the former CEO of Merrill Lynch has resigned from his post at Bank of America, which overtook Merrill just three weeks ago, among allegations of extravagant personal expenses charged to the company.
It was recently reported that Thain spent at least $1.22 million to redecorate his office in 2008, while Merril Lynch was reeling from toxic debt from bad mortgages. During the redecoration process, Thain was beginning to cut thousands of jobs to help aid the ailing company.
Thain began working at Merrill Lynch as the firm began suffering massive losses due to the mortgage crisis. The losses continued throughout 2008 and forced the company to sell to Bank of America in mid-September or face near certain liquidation.
Just three weeks after Merrill Lynch merged with Bank of America, and right after these expenditures were revealed, Thain has resigned from his position at B of A. It appears that the allegations are the main reason, although there may have been storm clouds gathering around Thain for other reasons.
Thain has come under pressure in recent weeks after several top executives at Merrill, including brokerage chief Bob McCann and investment banking head Greg Fleming, abruptly resigned from the firm citing differences with Thain. People close to Lewis say his relationship with Thain was further strained by the recent massive loss. Lewis himself has faced withering criticism for rushing the buy Merrill for $28 billion after less than two days of due diligence.
Despite the possible political reasons for his resignation, the extravagant expenditures are gaining national attention. CNBC reported that Thain hired Michael Smith, a high-profile interior designer that is now redecorating the Obama White House. In addition to the $800,000 fee for Smith, Thain bought several big ticket items for his office and private dining room, including an $87,000 area rug, a $68,000 “19th Century Credenza” and “Regency Chairs” for $24,000.
Thain signed off on these purchases personally. Smith will be redesigning the Obama White House, a much larger project, for just $100,000, presumably using furniture from the government’s existing reserve.