Those who live by the sword...

from Monday, Oct. 29, 2007
Marketplace:

Neal may be out on subprime results

Merrill Lynch CEO Stan O'Neal reportedly will be leaving the investment house following its announcement last week of $8 billion in subprime write-downs. Steve Henn reports O'Neal would be the highest profile casualty of the subprime mortgage debacle.

KAI RYSSDAL: Rumors that Stan O'Neal wasn't long for Merrill Lynch started bubbling to the surface on Friday. We told you last week after that $8 billion in subprime writedowns was announced that O'Neal said he's responsible for the performance of the firm -- and the board has apparently decided to hold him to that.

Marketplace's Steve Henn reports O'Neal would be the highest-profile casualty of the subprime mortgage debacle.

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Steve Henn: Last week, Merrill Lynch announced a $2.3 billion loss, one of the worst in its history. The bloodbath stemmed from investments in bundled subprime mortgages securities. Other big banks hedged their bets in subprime and did a lot better.

David Abella: Merrill Lynch is supposed to be a very cutting edge prestigious investment bank and it looks like they were totally caught sleeping at the wheel.

David Abella is a portfolio manager at Rochdale Investment Management.

Abella: Merrill's loss... the magnitude is just so much greater than the other institutions.

Abella says it's not surprising that the blame for the debacle has reached all the way to Merrill's CEO, Stanley O'Neal. Last week, after wiping out billions of dollars in shareholder equity, O'Neal began unauthorized negotiations for a merger with a rival bank. That deal could have netted O'Neal personally around a quarter of a billion dollars.

When O'Neal took the reins at Merrill Lynch five years ago, he set out to change the firm's corporate culture, making it more aggressive. He laid off almost 15,000 employees, and dozens of senior executives left.

Winthrop Smith: As a result, I think he has lost the loyalty of both former and current employees.

Winthrop Smith headed Merrill's international brokerage until 2002. He says O'Neal pushed out many top managers who had weathered similar credit crises in the past.

Smith: That loss of experience and loss of memory certainly has had an impact.

And Smith says today, it looks a lot like O'Neal is falling victim to the more cutthroat, unforgiving corporate culture that he helped create.
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Does this have anything to teach us, as the Church?