John Thain checks into career rehab at CIT

February 8, 2010

John Thain has checked into rehab — career rehab that is, at U.S. midmarket lender CIT. While a step down from the heights Thain has scaled on Wall Street in his career, this looks a good match. After its quick spell in bankruptcy, CIT needs a motivated financial technocrat, not an expert in the art of corralling bankers with big egos. This combination plays to Thain’s strengths — and offers him a chance at redemption, which he deserves.

Success won’t come easily. CIT is freshly emerged from bankruptcy and should be able to run its existing loan book down profitably. But figuring out how to generate new business is more difficult. The brand is tarnished and the firm cannot borrow on the same attractive terms available to rival banks or even GE Capital. Yet there is a continuing need among small businesses for capital, while competition is limited.

Thain’s grasp of capital markets — including stints running Merrill Lynch, the New York Stock Exchange and Goldman Sachs  — should serve him well in re-establishing CIT’s funding sources. And his ability to escape larger strategic traps to the benefit of investors shouldn’t be underestimated — after all, he sold Merrill for a juicy premium when it was on the verge of collapse.

Even if Thain can’t fully solve CIT’s funding problems, his prolific deal-making experience also holds out the possibility he could find safety in the arms of a larger rival. Either way, the patina of success that would accrue from successfully mending CIT would go a long way to offsetting any dings his reputation suffered while at Merrill. That is, as long as he makes a date with IKEA when it comes to refurbishing his new office digs.

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