NEW YORK—Merrill Lynch & Co. CEO Stanley O'Neal resigned his post earlier this week due to mounting pressure from the board of directors and criticism over the investment bank's largest quarterly loss in its 93-year-old history.
O'Neal, grandson of a former slave, went from growing up in a rural cotton farming community in Alabama to become the first African-American CEO at a major U.S. investment bank. O'Neal became Merrill's CEO five years ago, and quickly transformed the once-conservative investment bank into more of a risk-taking institution. Merrill posted record profits during its peak years, but took a hard fall as the market soured.
Merrill posted a $7.9 billion one-time loss and a $2.24 billion quarterly loss last week due to the recent subprime loan crisis. As mortgage borrowers defaulted on their loans, the value of Merrill's residential mortgage-backed securities plummeted.
But Merrill isn't out of the woods yet. According to MSNBC, there may be an additional $4 billion charge, and executives from rival banks believe that Merrill's woes will continue for some time as it faces potential lawsuits from its clients. "The struggles they are going to go through over the next two years are going to be horrible," one senior Wall Street figure told MSNBC.
A bigger reason for O'Neal's departure may have been his unauthorized remarks last week that Merrill should sell itself to retail bank Wachovia Corporation to broaden its core businesses. O'Neal approached Wachovia last week regarding a merger without board approval, which angered some board members.
A merger between Wachovia and Merrill would create the largest retail brokerage firm in the world, with close to $2.5 trillion in capital under management.
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