BofA returns to form with Merrill rehire trick
At least one legacy of the old Merrill Lynch is thriving at Bank of America: the kiss-off-and-embrace-back. The firm just rehired two former Merrill rainmakers who left in the dislocation following the broker’s sale to BofA during the financial panic of late 2008. While not an uncommon practice on Wall Street, no firm appears to have made so much a habit of welcoming back bankers as Merrill Lynch.
In the latest instance, it lured Sam Chapin and Todd Kaplan to return as executive vice chairmen of global banking, reporting to Tom Montag, who runs investment banking and trading. Chapin and Kaplan, who will focus on clients, have a combined 48 years of Merrill tenure.
With the integration of BofA and Merrill more settled, it’s a good sign the combined institution can win back grey-hairs who also know how to win business. Rivals have attempted similar back-to-the-future maneuvers. Lazard just welcomed back Felix Rohatyn, its octogenarian former senior partner and Wall Street elder statesman. Morgan Stanley begged John Mack to come back and run the firm in 2005, four years after he’d been ousted.
But Merrill is especially fond of its exiles. Former chief Stan O’Neal cut too deeply in the bond market rout of the early part of the century. To catch up quickly, Merrill rehired some traders — many of whom wound up taking big risks in subprime and structured finance. That infamously led to billions of losses and O’Neal’s ouster. To help clean up the mess, his successor John Thain rehired a former fixed-income executive, Jeff Kronthal, who had departed a year earlier because he thought Merrill was taking too many risks.
Flexibility in hiring the best people for the job isn’t necessarily a bad thing, if it shows pragmatism. On the other hand, Merrill’s repetitive practice of having to win back executives once kicked to the curb suggests a troubling volte-face management style. That could be expensive for shareholders, particularly if Merrill has to pay up to let people go — and then do the same to win them back.