As expected, Merrill Lynch & Co. (NYSE: MER) has ousted Chief Executive Stan O'Neal after the Wall Street firm took a gargantuan $8.4 billion write-down of securities backed by subprime mortgages -- whose value has been decimated -- that was almost double what the company had forecasted earlier this month, according to The Wall Street Journal [subscription required].
Can you imagine screwing up that badly and getting $250 million? That's the value of O'Neal's golden parachute pegged by the Associated Press. The question now is who else on Wall Street will be riding into the sunset with him. Jimmy Cayne of Bear Stearns? Chuck Prince of Citigroup Inc. (NYSE: C).
O'Neal's fall from grace has been stunning to watch.
In December, O'Neal promised that the $1.3 billion acquisition of subprime mortgage lender First Franklin would provide "revenue velocity" whatever that means. The company also said that it expected the acquisition to add to earnings by the end of 2007. Guess that didn't happen either. To make matters worse, O'Neal approached Wachovia Corp. (NYSE: WB) about a merger without consulting his board, which is a major no-no for any CEO. Let's not forget that Merrill's shares are down 29% this year, underperforming many of its peers including beleaguered Bear Stearns & Co. (NYSE: BSC).
To recap, O'Neal went full throttle into the subprime mortgage market at the height of the real estate market. He failed to consult the board on a major acquisition and has shafted the company's shareholders and will be richer beyond most people's wildest dream because of it.