CIT Group Chairman & CEO John Thain spoke with FOX Business Network’s (FBN) Neil Cavuto about selling Merrill Lynch to Bank of America, saying the acquisition ‘was a very good one’ for both sides and ‘if you look at where their earnings are coming from today, the vast majority of their earnings are coming from the pieces that were Merrill Lynch’.
Thain went on to say the ‘disaster deal’ for Bank of America was Countrywide, a deal that still presents ‘a tremendous amount of uncertainty as to what it is going to cost them’.
Excerpts from the interview are below:
On Bank of America:
‘The Merrill Lynch acquisition was a very good one for them. Maybe they overpaid a little at the time, but they also paid with their own stock. If you look at where their earnings are coming from today, the vast majority of their earnings are coming from the pieces that were Merrill Lynch. I don’t think there are any problems with the acquisition of Merrill Lynch from Bank of America’s perspective, the disaster deal was Countrywide’.
On whether Bank of America has gotten over their problems are in the mortgage area:
‘No they still have a tremendous amount of uncertainty as to what it is going to cost them to settle all of the mortgage issues that came out of Countrywide’.
On whether he feels bitter about the backlash following the sale of Merrill Lynch to Bank of America:
‘No I am sorry it was necessary to do that because Merrill Lynch was a great set of businesses. I wasn’t there very long. I would have loved to run it for a much longer time. We didn’t sell the company because it was going to make money. It was obviously it was losing a lot of money and the risk was we could go the way of Lehman if we didn’t sell’.
On whether Merrill Lynch would have ended up like Lehman Brothers had he not sold the company:
‘I think that’s very likely the case’.
On whether he will see the movie Margin Call based on the fall of Merrill and Lehman:
‘I lived the real life saga, I don’t really need to see the movie. I don’t know how you combine what I did for Merrill Lynch and what happened with Lehman, although I am sorry that was the outcome, selling Merrill Lynch to Bank of America for 5o billion dollars absolutely protected the shareholders and the employees and I think the outcome was a lot better’.
On Wall Street rebelling against the government by ‘welcoming’ a credit downgrade to send a message:
‘I don’t agree with that at all. The U.S. is still a AAA credit; the idea that the U.S.’s credit rating is below France’s makes no sense to me. The U.S. losing its AAA credit rating was a terrible thing. A terrible signal to the rest of the world. It’s up to congress to get their act together to bring the deficit down and get ourselves in a much more fiscally responsible spot’.
On Moody’s saying we could see a downgrade:
‘That is exactly where we cannot be. Congress needs to do their job’.
Whether the 50% reduction in Greece’s loan repayments to private lenders announced by European leaders will be effective:
‘I hope so. It is certainly a first step. If nothing else, I hope it is an example to the U.S.. If France and Germany can agree to a path to solving their financial problems, I hope our administration and congress can work on a path to solve our financial problems here. There are a number of risks to the proposal put out today. The first is how many of the private investors will accept the swap? I also think there is a question about even if they could get them to swap, is that going to be enough? Is Greece going to be able to pay its debt at 50 cents on the dollar. I think it is going to depend on how the GDP grows or shrinks in Greece and whether they are able to live up to the austerity measures they said they will’.
On whether this solution is only delaying the “painful medicine down the road”:
‘It is a risk with Greece because it’s not clear even after the haircut they can get that done. But it is certainly better than doing nothing’.
On MF Global:
‘I don’t know what has happened inside of MF Global but I certainly wish John the best. He has a tremendous amount of experience and I hope he can pull this off’.
On the U.S. economy:
‘The U.S. economy is growing, it’s just growing slowly and its not creating a lot of jobs. We are likely to be in a period of slow growth but it’s not going to mean a double dip’.
On whether Federal Reserve Chairman Ben Bernanke can help the U.S. economy:
‘The real problem is he doesn’t have a lot of tools. Rates are zero, he has kept rates at zero, it hasn’t helped very much. It’s not clear what else he can do’.
On whether President Obama will be a one term president if he does not turn the economy around:
‘It depends a lot on what the alternative is’.
On whether President Obama has turned his back on Wall Street:
‘I don’t know if he was ever a friend of Wall Street the big issue right now is jobs. If you look at where jobs are created, jobs are created in the small and middle market part of the economy. When I talk to those companies which are who we lend to, they say they are worried about three things: taxes, healthcare costs, and their regulatory burden’.
On whether General Electric CEO Jeff Immelt gets ‘special favors’:
‘I have no idea. They pay zero (tax) but they follow the rules. There are many loopholes that allow them to do that’.
On who he supports for President:
‘I haven’t committed to any of the candidates’.
On Occupy Wall Street:
‘They are occupying the wrong place. Instead of occupying Wall Street, they should be occupying Washington. We have to fix the system so you are not able to escape paying a fair rate’.
On Warren Buffet’s Op-Ed about taxing the rich:
‘If he really feels guilty he can send a check in’.
On whether there is a bond market bubble:
‘Rates can’t stay where they are. I think rates go up, a lot, it’s a question of when. They are not going to go up in the current environment. They are going to go up significantly’.