Stanley O'Neal

Last updated
E. Stanley O'Neal
Stanley O'Neal - Merrill EX-CEO on C-SPAN.png
Born (1951-10-07) October 7, 1951 (age 73)
Roanoke, Alabama, United States
Education B.S. in Industrial Administration
M.B.A in Finance
Alma mater General Motors Institute
Harvard Business School
Employer(s) General Motors
Merrill Lynch
Board member of Arconic
Platform Specialty Products Corporation [1]
SpouseNancy Garvey
Children2

Earnest Stanley O'Neal (born October 7, 1951 [2] ) is an American business executive who was chairman and CEO of Merrill Lynch from 2003 through 2007, having served in numerous senior management positions at the company prior to this appointment. O'Neal was criticized for his performance during his tenure as chief executive at Merrill Lynch, where he oversaw the deterioration of the firm's stability and capital position, which resulted in his ouster in October 2007, and the firm's eventual fire sale to Bank of America one year later. [3] Prior to his tenure as chairman and CEO, Merrill Lynch had thrived as a stand-alone company since 1914.

Contents

In 2002, O'Neal was named the “Most Powerful Black Executive in America” by Fortune magazine.

O'Neal was a member of the board of directors of General Motors from 2001 through 2006. He also served on the board of Alcoa.

Early life and education

Born into poverty in Roanoke, Alabama, [4] Earnest Stanley O’Neal was the grandson of a former slave. He was the eldest child of Earnest O’Neal, a farmer, and Ann Scales, a domestic. In the first years of his life, O'Neal was surrounded by his extended family on his grandfather's farm, "picking cotton and corn in his grandfather’s fields." He also sold and delivered newspapers. [2]

The family's fortunes improved when Stanley's father landed a job at the General Motors (GM) factory. [2] O'Neal's father moved his family from Wedowee, Alabama, to Atlanta, where he worked on a General Motors assembly line. [5] Stan O'Neal also worked briefly on GM's assembly line as a teenager under a work-study program offered by the General Motors Institute (later known as Kettering University), [6] where he gained a degree in industrial administration in 1974. GM later provided O'Neal a scholarship to attend Harvard Business School, where he attained his MBA in 1978 and later rejoined GM as a Treasury Analyst. [7]

Career

O'Neal initially worked as an analyst for General Motors; within two years he was a director in the treasury division.

Merrill Lynch

In 1986, O'Neal joined Merrill Lynch and, by the early 1990s, he was running Merrill's leveraged finance division. [8] After spells as global head of capital markets and co-head of the corporate and institutional client group, he spent two years as CFO from 1998 to 2000.[ citation needed ] In 2000, he was appointed president of the U.S. Private Client Group, the first executive of the division that oversees Merrill's brokerage who had not himself been a broker.[ citation needed ] O'Neal led massive layoffs within the division.[ citation needed ]

O'Neal became president of the firm in 2001 in a palace intrigue that eventually led to the early ouster of his predecessor and one-time mentor David Komansky. [9] By 2003, he was CEO and chairman. [7] O'Neal was one of the first African Americans to hold such a high position on Wall Street. He earned $48 million in 2006 and $46 million in 2007. [10] One of his first moves as CEO was to dismiss his number two executive, executive vice chairman Thomas H. Patrick, Sr., and afterward Arshad R. Zakaria, who headed institutional banking and securities.[ citation needed ] Originally there had been a deal where Patrick and Arshad R. Zakaria would support O'Neal's promotion to CEO, and in return Zakaria would be appointed president.[ citation needed ] Once O'Neal became CEO, however, he refused to continue this "backroom dealing". [11] [12]

As CEO, O'Neal attempted to get rid of the 'Mother Merrill' culture of job security, arguing that it promoted cronyism instead of merit.[ citation needed ] He also wanted to transform Merrill into a trading powerhouse, and to beat Goldman Sachs at its own game. After the departure of Chris Ricciardi in 2006, O'Neal hired Osman Semerci as Global Head of Fixed Income, on the advice of trading and investment banking head Dow Kim and COO Ahmass Fakahany. [13] Semerci continued the push into the subprime mortgage-backed CDO market, and grew the firm's position from $5-$6 billion worth of exposure to $55 billion in under one year, while firing respected trader Jeff Kronthal and demoting risk manager John Breit, both of whom had warned against too much exposure to CDOs. Merrill was one of the top CDO underwriters of the boom era, a plan that initially brought huge bonuses to Merrill until the markets turned. [14] According to the then-president of Merrill, Greg Fleming, the dismissal of Kronthal in July 2006 was the day Merrill Lynch's fate was sealed, otherwise the firm may have "avoided the subprime problems that would soon bring Wall Street to its knees. After that date, Merrill was doomed to make the same mistakes as its competitors." [12]

O'Neal was regarded as out of touch as the market changed and Merrill steered towards trouble, as he had "become isolated from his own firm. He had no idea that key risk managers had been pushed aside or that the people he had put in important positions were out of their depth". [12] O'Neal was described as a manager who "had never been the kind of C.E.O. who walked the trading floor. By 2006, he was so divorced from his own firm that he failed to appreciate the utter lunacy of Semerci’s desire to clean house. Did he really think Semerci could get rid of Merrill’s most experienced mortgage traders and not harm the mortgage desk? Sadly, it seems that O’Neal didn’t think about it at all." [12] "At the same time Goldman executives were canceling vacations to deal with the burgeoning subprime crisis, O’Neal was often on the golf course, playing round after round by himself", in fact six months before Bear Stearns nearly collapsed Merrill added tens of billions of risky securities to its balance sheet while Goldman moved to reduce exposure. [12]

During August and September 2007, as the subprime mortgage crisis swept through the global financial market, Merrill Lynch announced losses of $8 billion. O'Neal finally realized the huge exposure that Merrill had to subprime mortgage-backed CDOs, and that the firm would have to be sold in order to survive. [14] [15] As the crisis worsened, O'Neal approached Bank of America and Wachovia Bank about a possible merger, without first obtaining the approval of Merrill's Board of Directors, which led to his ouster. [16] On October 30, 2007, O'Neal resigned as CEO. He left with a severance package including Merrill stock and options worth $161.5 million on top of the $91.4 million in total compensation he earned in 2006. [17] [18]

Post-resignation

The board hired John Thain from NYSE Euronext to replace O'Neal as chairman and CEO, believing that Thain could save the business, however the markets and the firm continued to deteriorate in 2008. Thain was forced to merge Merrill with Bank of America in September 2008, the weekend before [19] Lehman Brothers filed for bankruptcy.

On January 18, 2008, O'Neal was named to the board of directors of Alcoa. [20]

O'Neal is said to have an "abrasive" personality. [15] When Thain arrived at Merrill he scrapped O'Neal's practice of having the security guards always hold an entire elevator bank open exclusively for him. [21]

CNBC includes O'Neal in their list of "Worst American CEOs of All Time". [15] The New York Times Magazine on April 18, 2010, described O'Neal as one of the "feckless dolts" who helped precipitate the financial crisis of 2007. During the final hearings prior to the firm's merger with Bank of America, numerous people – including a founder's son, Win Smith – laid the blame on O'Neal for the firm's downfall and loss of independence. [22]

Financial Crisis Inquiry Commission

On March 11 of 2016, a release of documents by the National Archives revealed that the Financial Crisis Inquiry Commission had recommended that O'Neal be prosecuted for multiple crimes in connection with his activities as CEO of Merrill Lynch during the lead up to the sub-prime crisis. [23] No formal legal action has resulted, however.

Related Research Articles

<span class="mw-page-title-main">Bear Stearns</span> American investment bank

The Bear Stearns Companies, Inc. was an American investment bank, securities trading, and brokerage firm that failed in 2008 during the 2007–2008 financial crisis and the Great Recession. After its closure it was subsequently sold to JPMorgan Chase. The company's main business areas before its failure were capital markets, investment banking, wealth management, and global clearing services, and it was heavily involved in the subprime mortgage crisis.

A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS). Like other private label securities backed by assets, a CDO can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. Distinctively, CDO credit risk is typically assessed based on a probability of default (PD) derived from ratings on those bonds or assets.

<span class="mw-page-title-main">John Thain</span> American businessman

John Alexander Thain is an American financial executive and investment banker. He was president and co-COO of Goldman Sachs, and then CEO of the New York Stock Exchange. Thain then became the last chairman and CEO of Merrill Lynch & Co. before its merger with Bank of America. He was designated to become president of global banking, securities, and wealth management at the newly combined company, but resigned on January 22, 2009. Ken Lewis, CEO of Bank of America, reportedly forced Thain to step down after several controversies, such as the losses at Merrill Lynch which proved to be far larger than previously estimated, and the award of huge executive bonuses. Thain then was chairman and CEO of the CIT Group. He has been a board member of Uber since 2017.

<span class="mw-page-title-main">2000s United States housing bubble</span> Economic bubble

The 2000s United States housing bubble or house price boom or 2000shousing cycle was a sharp run up and subsequent collapse of house asset prices affecting over half of the U.S. states. In many regions a real estate bubble, it was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2011. On December 30, 2008, the Case–Shiller home price index reported the largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States.

<span class="mw-page-title-main">Merrill Lynch & Co.</span> Defunct American investment bank

Merrill Lynch & Co., formally Merrill Lynch, Pierce, Fenner & Smith Incorporated, was a publicly-traded American investment bank that existed independently from 1914 until January 2009 before being acquired by Bank of America and rolled into BofA Securities.

David Herman Komansky was an American banker who was chairman and chief executive officer of Merrill Lynch & Company.

<span class="mw-page-title-main">Subprime mortgage crisis</span> 2007 mortgage crisis in the United States

The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions losing their jobs and many businesses going bankrupt. The U.S. government intervened with a series of measures to stabilize the financial system, including the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA).

<span class="mw-page-title-main">Asset-backed securities index</span>

An asset-backed securities index is a curated list of asset-backed security exposures that is used for performance bench-marking or trading.

The subprime mortgage crisis impact timeline lists dates relevant to the creation of a United States housing bubble, the 2005 housing bubble burst and the subprime mortgage crisis which developed during 2007 and 2008. It includes United States enactment of government laws and regulations, as well as public and private actions which affected the housing industry and related banking and investment activity. It also notes details of important incidents in the United States, such as bankruptcies and takeovers, and information and statistics about relevant trends. For more information on reverberations of this crisis throughout the global financial system see 2007–2008 financial crisis.

Nelson Joosuk Chai is an American investment banker and financial executive. He formerly served as the chief financial officer of American financial services company Merrill Lynch and briefly as Bank of America's president for the Asia-Pacific region. He is the former president of CIT Group and reported directly to then CEO John Thain. On August 21, 2018, it was announced that Chai has been hired as the chief financial officer of Uber.

<i>Chain of Blame</i>

Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis is a 2008 book about the subprime mortgage crisis in the United States by investigative journalists Paul Muolo of National Mortgage News and Mathew Padilla of the Orange County Register. The book has an accompanying website with some excerpts, author biographies and a roundup of events in the subprime mortgage crisis that occurred after the book was printed.

This article provides background information regarding the subprime mortgage crisis. It discusses subprime lending, foreclosures, risk types, and mechanisms through which various entities involved were affected by the crisis.

Credit rating agencies and the subprime crisis is the impact of credit rating agencies (CRAs) in the American subprime mortgage crisis of 2007–2008 that led to the financial crisis of 2007–2008.

<i>The Last Days of Lehman Brothers</i> 2009 Television Film

The Last Days of Lehman Brothers is a British television film, first broadcast on BBC Two and BBC HD on Wednesday 9 September 2009. Filmed in London, it was written by Craig Warner and directed by Michael Samuels. It was shown as part of the BBC's "Aftershock" season, a selection of programmes marking the first anniversary of the collapse of the American investment bank Lehman Brothers. It featured James Cromwell, Ben Daniels, Corey Johnson, Michael Landes and James Bolam.

First Franklin Financial Corp., not to be confused with 1st Franklin Financial Corporation, was a San Jose, California-based home mortgage lender that specialized in subprime loans. It had been owned by two of the biggest casualties of the subprime mortgage crisis, National City Corp. in Cleveland and Merrill Lynch.

Magnetar Capital LLC is a hedge fund based in Evanston, Illinois. The firm was founded in 2005 and invests in fixed-income, energy, quantitative, and event-driven strategies. The firm was actively involved in the collateralized debt obligation (CDO) market during the 2006–2007 period. In some articles critical of Magnetar Capital, the firm's arbitrage strategy for CDOs is described as the "Magnetar trade".

<i>Inside Job</i> (2010 film) 2010 documentary film by Charles Ferguson

Inside Job is a 2010 American documentary film, directed by Charles Ferguson, about the 2007–2008 financial crisis. Ferguson, who began researching in 2008, said the film is about "the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption", amongst them conflicts of interest of academic research, which led to improved disclosure standards by the American Economic Association. In five parts, the film explores how changes in the policy environment and banking practices led to the 2007–2008 financial crisis.

Merrill Lynch, Pierce, Fenner & Smith Incorporated, doing business as Merrill, and previously branded Merrill Lynch, is an American investment management and wealth management division of Bank of America. Along with BofA Securities, the investment banking arm, both firms engage in prime brokerage and broker-dealer activities. The firm is headquartered in New York City, and once occupied the entire 34 stories of 250 Vesey Street, part of the Brookfield Place complex in Manhattan. Merrill employs over 14,000 financial advisors and manages $2.8 trillion in client assets. The company also operates Merrill Edge, a division for investment and related services, including call center counsultancy.

Jeffrey Peek is a finance industry executive. He headed CIT Group from 2003 until it was reorganized following the 2008 financial crisis.

References

  1. ↑ Board of Directors Archived 2018-04-04 at the Wayback Machine , Platform Specialty Products Corporation
  2. 1 2 3 McNally, Deborah (2007-12-02). "Stanley O'Neal (1951- )" . Retrieved 2020-09-01.
  3. ↑ 10 Gaffes by Doomed CEOs on www.usnews.com
  4. ↑ "Stan O'Neal: The Rise and Fall of a Numbers Guy". NPR.org. Retrieved 2020-09-01.
  5. ↑ Andrew Ross Sorkin. Too Big to Fail. Penguin, 2009, p. 144.
  6. ↑ "O'Neal, Stanley (1951- )", blackpast.org
  7. 1 2 How Stan O'Neal went from the production line to the front line of investment banking
  8. ↑ Junk Bonds Bounce Back. Black Enterprise, October 1992
  9. ↑ "KOMANSKY OUT AS MERRILL CEO", Eric Herman, NY Daily News, July 23, 2002
  10. ↑ (in German) Christiane Oppermann: Amerikaals Supermacht - Die Zocker von der Wall Street Der Spiegel, 4/2008
  11. ↑ Whatever happened to mother Merrill?, LANDON THOMAS Jr, New York Times , August 03, 2003
  12. 1 2 3 4 5 "The Blundering Herd", Vanity Fair, November 2010
  13. ↑ Bethany McLean, Joseph Nocera (2010). All The Devils Are Here. Portfolio/Penguin. p. 9.
  14. 1 2 Crash of the Titans, Greg Farrell, Crown Business, 2010
  15. 1 2 3 Portfolio's Worst American CEOs of All Time 18, Stanley O'Neal
  16. ↑ O'Neal Ouster Makes Mess of Maternal Merrill Lynch, Bradley Keoun, bloomberg.com October 29, 2007
  17. ↑ Financial Crisis Inquiry Report (PDF). GPO. 2011. p. 257.
  18. ↑ 101 Dumbest Moments in Business Fortune , 2007
  19. ↑ Fitzpatrick, Matthew Karnitschnig, Carrick Mollenkamp and Dan (2008-09-15). "Bank of America to Buy Merrill". Wall Street Journal. ISSN   0099-9660 . Retrieved 2020-10-04.{{cite news}}: CS1 maint: multiple names: authors list (link)
  20. ↑ "Alcoa Appoints Two New Directors", Stan O'Neal and Michael G. Morris to Join Company Board of Directors, alcoa.com, January 18, 2008
  21. ↑ Sorkin, Too Big to Fail, p. 141.
  22. ↑ "Merrill Founder's Son Rips O'Neal For Firm's Death", 12/05/2008, forbes.com
  23. ↑ "National Archives Opens Financial Crisis Inquiry Commission Records". National Archives. 2016-08-15. Retrieved 2017-01-09.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.