The appointment of John Thain to head troubled Merrill Lynch demonstrates, yet again, the long reach of Goldman Sachs.
Thain, currently CEO of the New York Stock Exchange, began his career as an investment banker at Goldman. He went on to become co-president and co-chief operating officer.
As the New York Times reports, Thain was chosen not only for his success at the exchange, but also for his background at Goldman.
The idea that Merrill would seek a leader from a rival rankled some. “It’s shocking [they picked] someone from a Goldman Sachs background,” former Merrill CEO Dan Tully told the Wall Street Journal, observing that Thain didn’t seem to be a “people person” who would fit easily into Merrill’s culture. “I understand he’s very cerebral,” Tully said.
Yet the Merrill culture is one of the factors that has led the company into so much trouble. Former CEO Stanley O’Neal was forced to resign two weeks ago after he approached Wachovia CEO G. Kennedy Thompson to discuss a possible merger. The move had followed announcement of a $8.4 billion writedown, largely due to subprime mortgage losses.
Goldman, on the other hand, has been able to avoid many of the ills faced by Merrill and other firms. It’s also a frequent source of talent for both government and industry. Henry M. Paulson Jr. and former Treasury Secretary Robert E. Rubin, now chairman of Citigroup. Former Goldman co-chairman John Whitehead has served as deputy secretary of state and head of the Federal Reserve Bank of New York. New Jersey Gov. Jon S. Corzine was a Goldman chairman & CEO.
Not surprisingly, Thain’s successor at the New York Stock Exchange will be another Goldman Sachs alumnus. Duncan Niederauer, a former Goldman managing director and most recently president and co-COO of the exchange, will become CEO.