John Thain's Attempted Comeback

NEW YORK - SEPTEMBER 25:  People lay underneath the iconic Wall Street bull during a rally in the financial district against
NEW YORK - SEPTEMBER 25: People lay underneath the iconic Wall Street bull during a rally in the financial district against the proposed government buyout of financial firms September 25, 2008 in New York City. In response to the global financial crisis, dozens of protesters, from a variety of activist groups, denounced the capitalist system, Wall Street and the Bush administration. (Photo by Spencer Platt/Getty Images)

People who know John Thain tell me he's a changed man.

The same doofy Wall Street fat cat who during the financial crisis
infamously spent $1.22 million to redecorate his office using
shareholder money for such necessary items as a $35,000 "commode on
legs" and a $1,400 "parchment waste can" not to mention lots of
expensive rugs, sconces and a George IV chair has learned his lesson,
these people tell me.

Back then Thain ran the big Wall Street firm Merrill Lynch, which was
heading for Lehman Brothers land of insolvency before being purchased
by Bank of America. You wouldn't know it listening to Thain though; he
never seemed to miss a chance in 2008 to say the firm was doing just
great even as it was sinking into the abyss.

And yes, once it was in the abyss and Bank of America bought Merrill
at the height of the meltdown, Thain did something dumb once again: He
tried to get a $10 million bonus. In his bubble head, it didn't matter
that BofA required a taxpayer bailout to stay aflout primarily because
of Merrill's soured balance sheet (as proof, BofA today just shelled
out more than $2.4 billion to settle a taxpayer lawsuit related to the
ill-advised purchase).

But none of this should reflect poorly on the new John Thain, who is
now running the firm called the CIT group, a company that lends to
small and midsized business. He's a humbled man after being out of the
Wall Street limelight and truly understands how to operate as a CEO in
the modern, post-financial crisis world where the public looks down on
the turpitude of wayward fat cats, particularly those who profit from
taxpayer bailouts.

As proof, they say, is that Thain spends most of his days at CIT trying to
enhance shareholder value, either by growing the firm or trying to
sell it to a big bank. That's why shares of CIT are up modestly over
the past year. They also point to his office at CIT's Manhattan
headquarters. Gone are the expensive commodes sconces, rugs and
chairs. They were replaced, I am told, by lots of "Formica and
plastic." The place is so bare bones, it has the air of an "insurance
office," said one Wall Street executive who knows and likes Thain,
adding "he seems to have learned his lesson."

Don't bet on it.

Thain, as I've been reporting, can't seem to get Wall Street out of his
blood and is making a comeback -- or at least trying to do so. He wants
to sell CIT to a bigger bank, investment bankers with knowledge of the
matter tell me. His goal: To emerge as a contender to run one of these
major institutions. After all, it's tough being a has-been with a crappy

But it's been rough going for old "John Boy," as he is
not-so-affectionately known on Wall Street. Merrill was a pretty easy
to sell even during the financial crisis because the bank's former CEO
Ken Lewis was such a glutton (remember he also bought Countrywide, the
source of the bank's current woes).

Years after the meltdown, CIT is a different story. To begin with, the
Federal Reserve has it on some double-secret probation watch list,
because it was bailed out with more than $2 billion of government TARP
money, filed for bankruptcy and then stiffed the American taxpayer.

Meanwhile, he just can't sell CIT to a big U.S. bank like in the good old
days. In the post-bailout Wall Street, regulators are wary about
making any major Too Big To Fail bank even bigger and more likely to

And no matter how much Thain tries, he will never be able to shake the
taint of that $35,000 commode and ridiculous bonus move.

In other words, Thain is stuck in that office of Formica, at least for a while.

That's what I reported earlier this week and what most people on Wall
Street considered solid fact, something John Thain didn't like
probably because it reminded him of his irrelevance. So instead of
telling me that -- and being asked real questions about his attempted
comeback -- Thain turned to the same useful television reporter he
uses whenever he needs to spin things.

This was the same "reporter" who let Thain spin a bizarre theory back
in 2009 about the office renovation namely that it was done during a
different "economic environment," which turned out to be just a few
months before the actual meltdown took place and while Merrill was
bleeding red ink. And, he said back then, it wasn't just his office
that got the big redo; it was a conference room and a reception area so
his guests could actually partake in the fun of going to the bathroom
in that expensive commode.

Some things never change. This time, said "reporter" let Thain spin
another bizarre tale that, for instance, he really didn't want that
bonus back four years ago; instead he was simply testing the waters
with regulators seeing how much he could push them to do stupid things
like funneling taxpayer money into his wallet, or as he put it, "One
of the issues that we were worried about at the time was if you take
government money, how much say does the government have in how you run
your business?"

He also pointed out to the gullible one that CIT isn't for sale. In
fact, he isn't that desperate guy the bad people at Fox made him out to
be, yearning for the days of wood-panelled offices and fancy rugs of
the big banks. No one at Fox checked the facts about his amibitions
with his people before reporting any of this.

Thain waited two days before trying to set the record straight in his
warped mind, forgetting (or omitting) the inconvenient fact that his
spokesman would not deny our report two days ago when I asked him to
do so.

He also omitted the inconvenient fact that the story is no longer that
he wants to sell but that no one, it appears, wants to buy CIT.

In other words, his bid to become relevant again has hit a roadblock
called regulation. Simply put, U.S. bank regulators apparently aren't
keen on the big "systemically important" banks taking on a project
like CIT, which would add even more risk to their balance sheets, not
to mention a top executive with such poor taste in furniture.

There is a bright spot to all of this: Finally we have something to
cheer Dodd Frank about. Yes, this Rube Goldberg regulation barely makes
a dent in preventing Too Big To Fail banks from wreaking havoc on us
again, but it's apparently saving the banking system from the likes of
John Thain.