Read about Stan O'Neal courtesy of the Times online. This article was not written by me credit is given to Tom Bawden in New York.
Stan O’Neal’s ignominious departure from Merrill Lynch comes after a long and distinguished career which saw him rise from the shop floor of General Motors to head one of Wall Street’s most powerful firms.
The 56-year old-grandson of freed slaves got off to a tremendous start at the helm as he began to dismantle the "Mother Merrill" culture, which accepted lower profit margins in place of risk.
Mr O’Neal, who took the top job in 2002, set about cutting costs through mass redundancies at the same time as stepping up the group’s exposure to higher-margin areas such as loans and equity for leveraged buyouts, commodities and risky "sub-prime" mortgages.
Mr O’Neal’s move away from Merrill’s core stock underwriting and money management business into a higher octane group investing more of its own money initially paid significant dividends. The bank’s profits quickly more than doubled to average at more than $5 billion annually between 2003 and 2006 and the share price soared.
In 2006, Merrill made a $7 billion profit investing from its own balance sheet, compared with $2.2 billion in 2002. But the group became increasingly ambitious, hiking up investment in so-called collatorised debt obligations, or pools of bonds largely backed by sub-prime mortgages, from about $1 billion 18 months ago to more than $40 billion.
Those investments were largely responsible for an $8.4 billion writedown, announced last week, which gave Merrill its largest quarterly loss, of $2.24 billion, in its 93-year history.
Some analysts are predicting that Merrill will take a further $4 billion writedown this quarter as the fallout from America’s housing crisis continues to force down the value of these "CDOs".
Adam Compton, an analyst at RCM Investors, said: "A lot of the damage stems from the attempt to change a culture that was inherently against risk – which blew up in its face."
Mr O’Neal grew up in poverty in the Deep South, among the cottonfields of Wedowee, Alabama. A golf fanatic, he had speech training to modify his southern drawl and methodically worked his way up the ranks from the assembly line at General Motors' plant in Doraville, Georgia.
He enrolled on a programme that helped workers attend college and graduated from the General Motors Institute, now Kettering University. From there he won a scholarship to study for an MBA at Harvard Business School which led to a job at GM’s treasurer’s office.
He joined Merrill Lynch in 1986, age 35, working in its junk bond department, which he was heading three years later.
Mr O’Neal’s single-minded determination did not frequently translate into consensus building. It is understood that he often drove through his own agenda, with minimal discussion, in a pattern which culminated in his unsolicited approach to Wachovia this month to see if it might be willing to acquire his firm.
That approach, which came to nothing, is thought to have infuriated the board, not least because it smacked of desperation.
Mr O’Neal also had a habit of cutting long-term staff that were loyal to the group and had a wealth of experience. In one such move he ousted three long-term bond executives – Jeffrey Kronthal, Harry Lengsfield and Doug DeMartin, in July 2006 – three people who might have helped steer Merrill Lynch through its sub-prime woes.
As he contemplates his time at Merrill Lynch, Mr O’Neal may question the wisdom of the strategy he voiced in 2002: "The Mother Merrill, cradle-to-grave thing isn’t possible to do. It’s not even smart to do."
The 56-year old-grandson of freed slaves got off to a tremendous start at the helm as he began to dismantle the "Mother Merrill" culture, which accepted lower profit margins in place of risk.
Mr O’Neal, who took the top job in 2002, set about cutting costs through mass redundancies at the same time as stepping up the group’s exposure to higher-margin areas such as loans and equity for leveraged buyouts, commodities and risky "sub-prime" mortgages.
Mr O’Neal’s move away from Merrill’s core stock underwriting and money management business into a higher octane group investing more of its own money initially paid significant dividends. The bank’s profits quickly more than doubled to average at more than $5 billion annually between 2003 and 2006 and the share price soared.
In 2006, Merrill made a $7 billion profit investing from its own balance sheet, compared with $2.2 billion in 2002. But the group became increasingly ambitious, hiking up investment in so-called collatorised debt obligations, or pools of bonds largely backed by sub-prime mortgages, from about $1 billion 18 months ago to more than $40 billion.
Those investments were largely responsible for an $8.4 billion writedown, announced last week, which gave Merrill its largest quarterly loss, of $2.24 billion, in its 93-year history.
Some analysts are predicting that Merrill will take a further $4 billion writedown this quarter as the fallout from America’s housing crisis continues to force down the value of these "CDOs".
Adam Compton, an analyst at RCM Investors, said: "A lot of the damage stems from the attempt to change a culture that was inherently against risk – which blew up in its face."
Mr O’Neal grew up in poverty in the Deep South, among the cottonfields of Wedowee, Alabama. A golf fanatic, he had speech training to modify his southern drawl and methodically worked his way up the ranks from the assembly line at General Motors' plant in Doraville, Georgia.
He enrolled on a programme that helped workers attend college and graduated from the General Motors Institute, now Kettering University. From there he won a scholarship to study for an MBA at Harvard Business School which led to a job at GM’s treasurer’s office.
He joined Merrill Lynch in 1986, age 35, working in its junk bond department, which he was heading three years later.
Mr O’Neal’s single-minded determination did not frequently translate into consensus building. It is understood that he often drove through his own agenda, with minimal discussion, in a pattern which culminated in his unsolicited approach to Wachovia this month to see if it might be willing to acquire his firm.
That approach, which came to nothing, is thought to have infuriated the board, not least because it smacked of desperation.
Mr O’Neal also had a habit of cutting long-term staff that were loyal to the group and had a wealth of experience. In one such move he ousted three long-term bond executives – Jeffrey Kronthal, Harry Lengsfield and Doug DeMartin, in July 2006 – three people who might have helped steer Merrill Lynch through its sub-prime woes.
As he contemplates his time at Merrill Lynch, Mr O’Neal may question the wisdom of the strategy he voiced in 2002: "The Mother Merrill, cradle-to-grave thing isn’t possible to do. It’s not even smart to do."
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