Tuesday, October 13, 2009

CIT CEO to Resign

With CIT's bankruptcy a near certainty after a failed attempt to swap crappy debt for longer dated, even crappier debt, CIT's CEO Jeffrey Peek thought it might be a good time to resign. Mr. Peek, as some might recall, left Merrill in a huff in 2003 after being passed over for the top job, a job I'm certain he would've been very good at. If anyone could've lost more money at the helm of Merrill Lynch than Stan O'Neal, it would've been Jeffrey Peek. Instead, he joined CIT, where he took a relatively conservative lender to small businesses, levered it up with short-term financing, and then loaded it up with subprime garbage. In comparison to Merrill, CIT only punted a cumulative $5 billion over nine consecutive quarters, a mere pittance, but it was enough to bring the lender to its knees, pleading for a debt swap with its lenders. In any event, a pre-packaged bankruptcy is likely in the cards soon. Too bad Mr. Peek won't be sticking around to clean up his own mess.

One would think that after all the high profile debacles of the past couple of years, where CEO after CEO has been forced out for making terrible mistakes or just not paying attention, that the cult of the CEO would be dying down a bit in the US and comp packages would be cut severely. Other than maybe Warren Buffett, Steve Jobs, Sergey Brin and Larry Page, is anyone else really worth all the money corporate boards throw at them? Ironically, the aforementioned CEOs don't even work for the money, they do so out of passion for their companies. But no, particularly at financial firms, you see a return to the mentality of "I'd better get paid alot of money because I'm the only talented person who can do this job." And boards buy into it every time. That's because it's easier to rubber stamp a high compensation package than it is to stop a CEO from putting a company on a path to ruin.

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