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Morning Coffee: The most contentious banker in the world just made a comeback. Goldman Sachs’ interesting new hire

John Thain Deutsche Bank

John Thain doesn’t need the money. Or at least, he probably doesn’t need the money. – Despite earning around $100m during his 24 year career at Goldman Sachs, followed by a signing bonus alone of $15m when he joined Merrill Lynch in 2007, followed by pay packages of between $6m and $11.4m a year during his five years at CIT, Thain has a reputation as a big spender. Witness, after all, the infamous $35k commode on legs that was part of Thain’s $1.2m office redo when he arrived at Merrill Lynch in the midst of the financial crisis.

Now the promise of another monthly paycheck has lured Thain out of retirement. – Either that, or the prospect of an exciting new, “challenge.”

Deutsche Bank is certainly the latter. Thain, who’s joining as a member of the German bank’s supervisory board along with former Morgan Stanley banker Mayree Clark, IHS Markit executive Michele Trogni and PwC Europe executive chairman Norbert Winkeljohann arrives at a time of strife for Deutsche. The bank’s shares are down almost 30% this year alone. A power struggle is playing out between Paul Achleitner, Deutsche’s chairman, and John Cryan, Deutsche’s CEO. Achleitner hired Cryan but is now doing his best to unseat him: Cryan wants big cuts to the investment bank;  Achleitner doesn’t.

Thain is an interesting person to throw into this mix. No stranger to banking power struggles, he has a reputation for being both ruthless and conspiratorial.

The Financial Times’ excellent portrait of Thain from 2009 provides some measure of the man who’s joined the DB mix. At Goldman, the FT notes that Thain effectively turned on his mentor – Jon Corzine, by conspiring with several other Goldman executives to oust Corzine in 1998. In so doing, Thain gained a reputation for ruthless: he was described by one Fed official as a, ““a stone-cold killer.” At Merrill, Thain was later described by some colleagues as arrogant, stealing all the glory for himself and unable to command the respect and obedience of the ranks. Thain is said to have wanted a $40m bonus for selling Merrill to BofA (later commutated to a demand for $10m and then nothing at all). Bonuses were ultimately his undoing: Thain was let go from BofA (which had by then acquired Merrill Lynch) after news of Merrill’s $4bn of retention bonuses came to light.

Thain has since gone some way to redeeming himself. As CEO of CIT, a midsized commercial bank, he helped steer the organisation away from bankruptcy and retired aged 60 in 2015.

Now, the arch conspirator is back. Achleitner is undoubtedly hoping that Thain will provide a bulwark against Cryan. The supposition in some quarters is that Thain’s background means Deutsche will remain committed to its investment bank, especially in the U.S. However, Thain’s history suggests nothing should be taken for granted. Achleitner is weak. By bringing in a man like Thain he may merely have hastened the day he himself gets stabbed in the back.

Separately, undeterred by J.P. Morgan’s problems retaining big-brained machine learning specialists from outside finance, Goldman Sachs has got one of its own. The U.S. bank has hired Charles Elkan, an academic from the Artificial Intelligence Laboratory at Amazon Web Services. Elkan will be responsible for Goldman’s artificial intelligence efforts. 

Meanwhile:

John Thain said he regretted taking the job at Merrill Lynch and having to sell Merrill to Bank of America. (WSJ)

J.P. Morgan says Deutsche Bank needs to close its U.S. equities and corporate clients businesses. They suck up capital and aren’t very profitable. (Bloomberg) 

Deutsche Bank needs someone who can authoritatively raise the prospect of a break-up, or asset sale, or partnership, however reckless, rather than stick to the path of death by a thousand cuts. (Bloomberg) 

Analysts at Credit Suisse think trading revenues in investment banks could rise 5% year-on-year in the first quarter. Analysts at Jefferies think they could be up in the “high single digits.” (WSJ)  

A lot of young people who are tech workers don’t actually want to live in the UK any more, so we have got people drifting towards places like Berlin, places like Barcelona, places like Lisbon. (Financial Times) 

Female bankers at Rothschild in London earn 55.8% less an hour than their male colleagues on a median basis. (Financial News) 

Goldman Sachs hired Hari Moorthy as a partner from J.P. Morgan, He’ll be building a suite of cash management tools, deposit accounts and other products for big companies, implying that Goldman is moving into commercial banking. (WSJ)

There’s still a way for hedge funds and private equity funds in the U.S. to avoid employees paying income tax on carried interest. (Bloomberg) 


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