Merrill Lynch Chief Executive Officer Stanley O’Neal Resigns

Last week, Merrill Lynch wrote down $7.9 billion in losses caused by beaten-down sub-prime and other mortgage-related securities, the largest hit taken by any Wall Street firm. Stanley O’Neal, who worked for 21 years at the brokerage giant, is a casualty of the sub-prime mortgage crisis.

Stanley O’Neal stepped down as chairman and chief executive of Merrill Lynch & Co. this morning, becoming the first head of a major investment bank to be ousted because of losses tied to sub-prime mortgages.

O’Neal’s 21-year career at the brokerage giant ended with a six-paragraph news release announcing that board member Alberto Cribiore would become interim non-executive chairman until a permanent successor could be found. Merrill’s co-presidents Greg Fleming and Ahmass Fakahany will handle day-to-day management of the firm, the company said.

“Mr. O’Neal and the board of directors both agreed that a change in leadership would best enable Merrill Lynch to move forward and focus on maintaining the strong operating performance of its businesses, which the company last week reported were performing well, apart from sub-prime mortgages and CDOs,” the company said in the release.

Several candidates are in the running to replace O’Neal, with Laurence Fink, chief executive of money manager BlackRock Inc., which is partially owned by Merrill, considered the leading candidate.

Also thought to be under consideration are Robert McCann, the head of Merrill’s powerful brokerage division; and John Thain, the chief of NYSE Euronext Inc., the parent company of the New York Stock Exchange.

Last week, Merrill wrote down $7.9 billion in losses caused by beaten-down sub-prime and other mortgage-related securities, the largest such hit taken by any Wall Street firm.

Less than three weeks earlier, Merrill had forecast $4.5 billion in mortgage write-downs, which itself had followed earlier assurances from the company that its mortgage-related hits would be moderate. The $3.4-billion increase in such a short span caught analysts and investors flat-footed and raised doubts about Merrill’s credibility in estimating and disclosing its losses.

Including losses on bonds related to troubled private-equity deals, Merrill’s total write-down was $8.4 billion and its third-quarter net loss was $2.2 billion.

O’Neal also was hurt by a reported overture to Wachovia Corp., a North Carolina-based banking giant, about a potential merger. O’Neal, who is also Merrill’s chairman, reportedly angered his fellow directors by approaching Wachovia without their knowledge.

Analysts wondered why O’Neal would court Wachovia, an up-and-coming bank but much less established than other potential partners such as JPMorgan Chase & Co. or Bank of America Corp.

Some speculated that it was a sign of desperation in Merrill’s executive suite.

Merrill Lynch chief resigns
By Walter Hamilton | Los Angeles Times