CIT Group, the small business lender that became one of the biggest victims of the credit crisis, named former Merrill Lynch CEO John Thain as its new chairman and chief executive, effective immediately.
Thain, who had been in talks with CIT for weeks about the job, will lead the company's transition into a more streamlined commercial lender focused on serving the small- and middle-sized market sectors.
Thain will make putting together a new management team and restructuring the firm's debt his top priorities, sources told CNBC. CIT needs a chief financial officer, risk manager and other important positions filled.
The former Merrill Lynch chief will get $500,000 in cash, $2.5 million of restricted CIT stock with a holding period of one year and the remaining $3 million in stock restricted for three years, the company said in a regulatory filing.
Apart from salary, Thain may get an incentive award from the board for 2010 capped at $1.5 million, the commercial lender said.
Thain, who takes over from CIT's interim CEO Peter Tobin, was hired partly for the expertise he gained restructuring the New York Stock Exchange.
Thain's compensation is subject to federal regulations, including Troubled Asset Relief Program and Federal Deposit Insurance Corp regulations, CIT said.
CIT, the nation's biggest small business lender, filed for bankruptcy protection on Nov. 1, making it one of the largest bankrupticies in US history. The company quickly emerged from bankruptcy court and went public in December.
CIT said Thain was hired partly for the expertise he gained restructuring the New York Stock Exchange, as it looks to reestablish itself after a disastrous foray into subprime lending.
Merrill Lynch under Thain also fell victim to the credit crisis and was acquired in late 2008 by Bank of America . Though Thain stayed on after the merger, he was soon forced out amid controversy over millions of dollars of bonuses paid to Merrill executives shortly before the firm reported a $15 billion fourth-quarter loss and Bank of America acquired the investment bank.
Ken Lewis, who was CEO of Bank of America at the time, also became embroiled in the controversy and was forced to retire at the end of last year.
CIT is not concerned about Thain's reputation after his short but controversial stint at Bank of America, and the board performed the appropriate due diligence before hiring him, a person familiar with the company's thinking told Reuters.
Thain told CNBC on Sunday that he saw this was a big opportunity. CIT has been in business for over 100 years and funding small and medium-sized businesses is the company's core strength, he said.
Thain, who will assume the role on Monday, replaces Peter J. Tobin, who has been acting as interim Chief Executive Officer. Tobin will remain a director at the firm.
—Reuters contributed to this report.