CHICAGO - Charlotte-based Bank of America Corp. on Friday fired public finance manager Peter Hill along with a handful of other bankers, sales, and trading professionals in what sources described as the first wave of dozens of cuts expected as the bank merges its operations with Merrill Lynch & Co.'s tax-exempt bond business.
A spokeswoman at the firm declined to comment on the reports, citing company policy on staff changes. Sources said in addition to Hill, at least two bankers at the director or managing director's level in Merrill's New York and Florida offices were cut along with a few sales, trading, and underwriting professionals in New York City.
The cuts come just one week after the U.S. government agreed to inject another $20 billion into Bank of America and to provide some protection from losses on an asset pool of approximately $118 billion of loans. The company needed the government assistance to help it absorb Merrill Lynch, which reported a staggering - and unexpected - $15.31 billion preliminary fourth-quarter loss as its financial condition deteriorated rapidly in December.
The turmoil continued Thursday when Merrill Lynch's former chief executive officer John Thain was pushed out of his position as president of Bank of America's global banking and global wealth and investment management. Bank of America chairman and CEO Kenneth Lewis asked Thain to resign for a number of reasons, including Thain's decision to go on a ski trip to Vail, Colo., in December, as Merrill's losses mounted, according to press reports.
Thain also pushed for the acceleration of up to $4 billion in bonus payments to Merrill Lynch employees in December - before the deal closed - in a move now being investigated by the New York attorney general's office, reports said.
Reports also surfaced last week that Thain, who drew public ire for asking for a $10 million bonus last year, spent more than $1 million of Merrill's money to renovate his office shortly after he joined the firm, including the purchase of an $87,000 rug.
Hill was hired by Bank of America as a managing director and head of public finance investment banking in June. Hill, a familiar name to most in the municipal market on Wall Street, previously worked at ACA Financial Guaranty Corp. He also spent 14 years at JPMorgan, serving as head of public finance until he left there in 2006. He is also a past vice chairman of the Municipal Securities Rulemaking Board, and a past member of the municipal executive committee of The Bond Market Association, now known as the Securities Industry and Financial Markets Association.
Much changed over the first six months of Hill's tenure as bank losses mounted, and in September it announced the acquisition of Merrill. In October, Merrill cut more than a dozen public finance bankers and as many as 10 sales and trading professionals as the economy soured.
The cuts came just a few months after Merrill announced with great fanfare the hiring of about 30 bankers from the shuttered ranks of UBS Financial Services Inc.'s public finance group.
Hill's future had been questioned by some after the internal announcement last month that Merrill's chairman of municipal markets John Lawlor was selected to lead the merged municipal unit. As head of public finance, Lawlor is overseeing all municipal activities, including origination, sales, and trading. No additional details on the structure of the public finance group were then available.
Amassing billions of dollars in losses amid the credit crisis, the largest investment banks have reduced headcount across the board. Along with Merrill Lynch, banks such as Goldman, Sachs & Co. and Citi have all made substantial cuts in recent months that have hit their public finance departments. These cuts come on top of contraction that occurred during the first half of the 2008 when UBS Securities's closed its public finance department and JPMorgan purchased Bear, Stearns & Co.
Bank of America announced its agreement to purchase Merrill Lynch - known for its "thundering herd" of brokers - Sept. 15, the same day Lehman Brothers Holdings Inc. filed for bankruptcy. Originally worth about $50 billion, the deal's total value has fallen to about $20 billion as Bank of America's stock price has slid.
Merrill ranked second last year among senior managers on all bond issues, managing $40.8 billion in 340 issues, while Banc of America Securities LLC ranked seventh, with 353 issues totaling $19.9 billion, according to Thomson Reuters.