Market mavens were stunned to learn that former Merrill Lynch CEO John Thain resigned from Bank of America .
The company gave no specifics for Thain's departure other than issuing the following statement. "(BofA Chairman and CEO) Ken Lewis flew to New York today to talk to John Thain. And it was mutually agreed that his situation was not working out and he would resign."
Karen Finerman wasn't terribly surprised. "Ken Lewis said he was blindsided by Merrill’s balance sheet," she explains. "How could he have confidence in Thain going forward?"
Meanwhile, Merrill Lynch executives received bonuses Thursday even as the company prepared to report a $15.45 billion fourth-quarter loss — a loss that led Bank of America to request and receive $20 billion in government bailout money. Merrill also received bailout funds.
The bonuses raise the question of how proper it was for executives in a struggling company to be given big payouts even as its soon-to-be-parent was accepting billions of dollars in government money.
Bonuses are widely seen in the investment banking industry as necessary to retain top performers, but the fact that they were granted while tens of thousands of jobs were being eliminated across the securities and banking industry raises another question: How necessary were they to prevent defections?
“There were probably necessary," muses Karen Finerman. "A lot of people at the Merrill brokerage are worth keeping,” and without bonuses she thinks some would have jumped ship.
SURVIVAL OF THE FITTEST FINANCIALS
Considering there are so many challenges facing the financials, are any poised to profit?
According to Leo Tilman, president LM Tilman & Co it’s Morgan Stanley and Goldman . And that’s largely because they’ve transformed themselves into banks.
However, don’t open your wallet yet. He says, “the uncertainty still remains. We are still a ways away from the point of entry into financials. But Morgan Stanley, Goldman as well as JP Morgan and Wells Fargo are pursuing radically different strategies than the rest and in my mind they will emerge the winners.
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Trader disclosure: On Jan. 22nd, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (EEM), (F), (FXI); Macke Owns (MCD), (BAC), (C), (TM), (SDS); Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Owns (MSFT), (UNH), (AET); Finerman's Firm Owns (DNA) & (DNA) Call Spread; Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO), (ANF)
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