KEY POINTS:
John Thain, the incoming chief executive of Merrill Lynch, is preparing for a sweeping reform of the banking group's fixed-income division, which will involve a swathe of job cuts, sources in New York have revealed.
"Absolutely everybody is dusting off their CVs, expecting the worst when Thain starts next week," said one Merrill fixed-income risk management expert, who declined to be named.
What is more, it seems many of the unloved Merrill traders and risk managers are being interviewed by Goldman Sachs, one of the only Wall St banks to have remained relativelyunscathed by the credit crunch crisis.
"It is like they want to know where all the bodies are buried," said the Merrill insider, who himself had been interviewed by Goldman.
Merrill Lynch, more than any other bank, failed to gauge the risk it was taking on when the bank invested billions upon billions of dollars in so-called collateralised debt obligations (CDOs) and other obscure debt-backed securities that have been sunk by the US sub-prime mortgage crisis.
Indeed, the failure to properly account for more than US$8 billion ($10.5 billion) of write-downs in this troubled area led to a third-quarter record loss in excess of US$2 billion, which ultimately cost Stan O'Neal, Thain's predecessor, his job.
Now, insiders say, the fixed-income division, particularly those involved in measuring risk, is considered "radioactive" by Merrill superiors.
"It is very hard to go on working here," the Merrill insider said. "Morale is very low."
- Observer
