CIT Group names ex-Merrill CEO John Thain as chairman, CEO

NEW YORK — John Thain is getting a second chance.

CIT Group Inc. tapped the former Merrill Lynch CEO to become its chairman and chief executive.

Thain brokered Merrill's sale to Bank of America as the credit crisis peaked in the fall of 2008, but was then pushed out the door after the deal closed as controversy swirled around bonus payments and mounting losses at the investment bank.

CIT, one of the nation's largest lenders to small and mid-sized businesses, is betting Thain can repair his and the company's image after a difficult 2009. CIT was forced into bankruptcy protection late last year after it was unsuccessful in trying to restructure its debt.

Thain, 54, takes over immediately. He will replace interim CEO Peter Tobin, who will remain on CIT's board of directors. Tobin had been serving as CEO since Jeffrey Peek retired on Jan. 15.

Investors reacted positively to the announcement that Thain will take the helm of the lender, which is based in New York. Its shares rose $1.25, or 5.7 percent, to $32 in premarket trading.

CIT will pay Thain an annual cash salary of $500,000. He will also receive $5.5 million in stock annually, of which $2.5 million will be subject to a one-year holding period. The remaining $3 million cannot be sold for three years.

Thain could also receive up to $1.5 million in bonuses based on the performance of the company. The board of directors will determine whether to award the performance-based bonuses.

As chairman and CEO of Merrill Lynch, Thain's deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.

Thain resigned as head of global wealth management of the combined company in January 2009, at the same time news of the bonus payments first surfaced. Bank of America Corp. last week agreed to settle a case with the Securities and Exchange Commission over claims it misled shareholders about the bonuses and more than $15 billion in fourth-quarter losses at Merrill to ensure the deal would be approved.

New York Attorney General Andrew Cuomo filed civil fraud charges against Bank of America and its former CEO Ken Lewis on similar grounds. Joe Price, who at the time of the deal was Bank of America's chief financial officer but now heads consumer banking, was also charged.

Thain was not charged with any wrongdoing.