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Same Missteps Felled 2 Wall Street Stars

Prince, O'Neal gambled they could ride out subprime storm

By Jane Yager,  Newser Staff

Posted Nov 5, 2007 12:20 PM CST
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(Newser) – With the CEOs of two financial giants making their exits within a week of each other, the Financial Times looks at the similarities in the undoing of Citigroup's Chuck Prince and Merrill Lynch's Stan O'Neal. Both struggled unsuccessfully to change corporate cultures, making enemies along the way, and both invested heavily in mortgage-related securities. Their key mistake, adds the the New York Times, was siting on them even as they tanked.

In the first half of the year, Citigroup and Merrill were the biggest issuers of collateralized debt obligations—bonds often invested in subprime home loans—to the combined tune of $61 billion, the Times notes. The bonds have been falling in value for months as default rates rise, but the two banks, unlike many others, seemed oddly confident that their CDOs would weather the storm.

Stanley O'Neal, Chairman and CEO of Merrill Lynch & Co., is seen in New York in this Nov. 1, 2006 file photo. (AP Photo/ Louis Lanzano, file)
Stanley O'Neal, Chairman and CEO of Merrill Lynch & Co., is seen in New York in this Nov. 1, 2006 file photo. (AP Photo/ Louis Lanzano, file)   (Associated Press)
Stanley O'Neal, Chairman and CEO of Merrill Lynch & Co. is seen in New York in this Nov. 1, 2006 file photo. Merrill Lynch, the world's largest brokerage, said Tuesday, Oct. 30, 2007 its embattled Chief Executive will retire, effective immediately. (AP Photo/ Louis Lanzano, file)
Stanley O'Neal, Chairman and CEO of Merrill Lynch & Co. is seen in New York in this Nov. 1, 2006 file photo. Merrill Lynch, the world's largest brokerage, said Tuesday, Oct. 30, 2007 its embattled Chief...   (Associated Press)
Citigroup Chairman and Chief Executive Charles Prince speaks during an unveiling ceremony for the group's new logo at Citibank Korea head office in Seoul in this March 30, 2007, file photo. Citigroup Inc.'s board plans an emergency meeting on Sunday, and Prince is expected to offer to resign, according...
Citigroup Chairman and Chief Executive Charles Prince speaks during an unveiling ceremony for the group's new logo at Citibank Korea head office in Seoul in this March 30, 2007, file photo. Citigroup...   (Associated Press)
Charles Prince, CEO of Citigroup, speaks at a press conference in New York, in this April 7, 2004 file photo. A report in the online edition of The Wall Street Journal on Sunday Nov. 4, 2007 says Charles Prince has resigned as Citigroup Inc. chairman and chief executive officer, and...
Charles Prince, CEO of Citigroup, speaks at a press conference in New York, in this April 7, 2004 file photo. A report in the online edition of The Wall Street Journal on Sunday Nov. 4, 2007 says Charles...   (Associated Press)
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