Six-million-dollar man: John Thain gets hefty salary to run CIT

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. 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. Thain will try to revitalize a commercial lender that was among the hardest hit by the recession and credit crisis. CIT Group, which lends to more than 3,000 businesses including supermarkets and department stores, was forced into bankruptcy after failing to raise cash to pay off outstanding debt. The more than 100-year-old company also was hammered by mounting loan losses as more customers fell behind on repaying loans during the recession. Common stock holders and the government lost their investments when CIT filed for bankruptcy protection. The Treasury Department had given CIT $2.3 billion in loans as part of its $700 billion financial bailout plan. CIT moved through bankruptcy in just six weeks because its key bondholders had already approved a reorganization plan. It was able to cut its total debt by $10.5 billion and deferred debt maturities for three years. The same month it emerged from Chapter 11 it made plans to start lending again, committing to fund $500 million in new government-guaranteed loans to small business customers in 2010. Thain inherits a company that in addition to its lending activities is the third-largest railcar leasing firm in the U.S. and the third-largest in airline financing globally, according to its Web site. "Much has been accomplished in recent months to position CIT for renewed success," Thain said in a statement. "We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs." Thain has also served as CEO of the New York Stock Exchange and as president and chief operating officer at Goldman Sachs Group Inc.