Brooklyn Foreclosure Stats Don't Look So Bad

No, I’m not, 3:48. You simply want to deny what I claim as true (because of emotion) but are struggling to do so (because of cognition and revelation). The What is an extremist. Some of his points are arguably accurate, but his obsession with his chosen topic bears little difference from the inflexible positions asserted by extremists of every stripe. Could you imagine speaking with him in person? Jeez. Based on his posts, he’s about as mentally balanced as Claude Vorilhon.

“Yes, he’s far-fetched. But so was Robert Shiller in 1999.”

So was Claude Vorilhon.

Fuck The What.

October 4, 2007
2 Executives Are Ousted at Merrill

By LANDON THOMAS Jr.
Merrill Lynch, facing the prospect of a major write-down from its exposure to the sinking mortgage market, dismissed two senior executives in its fixed-income division yesterday.

The firings also signaled that the aggressive push by Merrill’s chief executive, E. Stanley O’Neal, into riskier markets like leveraged loans, subprime mortgages and complex structured investments — all of which lie beyond the firm’s traditional area of expertise — may be coming back to haunt him.

One executive who was dismissed, Osman Semerci, 39, the head of Merrill’s fixed-income division, had been in the position for little more than a year. Until the meltdown in the credit markets, he had been seen as a rising young star. Also let go was Dale M. Lattanzio, who was the head of structured credit products, the locus of many of Merrill’s recent investment problems.

The dismissals are the latest sign that investment banks, facing big losses after years of big profits, are moving quickly to hold senior executives accountable for having succumbed too readily to the credit and buyout boom. Bear Stearns fired its co-president, Warren J. Spector, in August; Huw Jenkins stepped down early this week as the chief of UBS’s investment bank; and in February, HSBC dismissed the head of North American business, Bobby Mehta.

Several banks have also reported large write-downs in the quarter, including Citigroup, which this week said it would write off $5.9 billion in the third quarter, causing its profit to drop 60 percent.

At Merrill, Mr. Semerci, who is of Turkish origin, held previous top postings in various parts of Asia and was among the vanguard of young, hard-charging and, in many cases, foreign-born executives that Mr. O’Neal promoted when he became chief executive in 2002 and shook up the old guard at the firm.

Merrill, which reports its third-quarter earnings in mid-October, is expected to make a pre-earnings announcement in the coming days that it will write-down more than $4 billion in mortgage and other structured investments tied to the beleaguered credit market.

The write-down will come as an embarrassment for Mr. O’Neal, who during his time as chief executive pushed the firm into voguish high-risk areas of the market ranging from subprime to private equity investments as well as loans.

The focus was a departure for Merrill, a firm that has traditionally looked to its legion of more than 15,000 brokers for both its financial and cultural strength.

But in recent years, as Goldman Sachs continued to generate extraordinary profits from its proprietary trading and principal investment units, Merrill, along with other firms, took steps to increase its risk profile.

In fact, Mr. Semerci’s promotion followed the abrupt firing last July of two senior fixed income executives, Jeffrey Kronthal and Harry Lengsfield. According to a person briefed on the cause of their exit who did not want to be identified because he was not authorized to speak, Mr. Kronthal and Mr. Lengsfield were let go because they were told by senior executives at Merrill that they were not taking enough risk. A spokesman for Merrill denied that was the case.

Succeeding Mr. Semerci will be David Sobotka, 50, who joined Merrill in 2004 when it acquired Entergy-Koch, a small energy trading firm. His ascent has also been a rapid one. His career focus has been primarily on commodities, and now he will be asked to head Merrill’s giant fixed income, commodities and currencies division at a delicate time for the firm and the markets.

Besides the dismissals, Merrill told Dow Kim, the former head of trading who left the firm last spring, that he no longer would have access to an office that he had been using at the firm, according to a person briefed on Mr. Kim’s status who did not want to be identified because he was not authorized to speak. Mr. Semerci had reported to Mr. Kim.

A Korean-born derivatives specialist who also had a series of quick promotions under Mr. O’Neal, Mr. Kim left the firm last spring to start a hedge fund — a departure that at the time was described as mostly amicable.

In addition to giving him office space, Merrill said at the time that it would invest in his hedge fund, called Diamond Lake Capital. According to the person briefed on the situation, Mr. Kim was told this week that Merrill would not be investing in his hedge fund.

As it became clear this summer that the firm’s ramped up exposure to subprime mortgages and securities tied to pools of risky assets, or collateralized debt obligations, would result in a major write-down, Mr. Kim’s stature at the firm deteriorated quickly.

He also oversaw the $1.3 billion acquisition of First Franklin, the mortgage originator, last year just before the collapse of the housing market.

While Mr. Kim took the brunt of the blame for Merrill’s increased risk profile, Ahmass L. Fakahany, the current co-president and a close associate of Mr. O’Neal, monitored risk management at the firm until May of this year when he was promoted. There was no indication that his job was in jeopardy.

The write-down, whenever it does come, can be seen as a reminder of what happens to firms when they stray from their core areas of competence. In 1989, Merrill wrote down $470 million from losses in high yield investments; in 2000, the firm took a $2 billion write-down from losses related to the firm’s aggressive expansion overseas; and now Merrill will take an expected $4 billion charge from its foray into credit markets.

While Mr. O’Neal has received credit for cutting costs and making the firm more nimble and efficient, one criticism has been that he pushed out a large number of experienced executives, replacing them with younger ones like Mr. Kim and Mr. Semerci.

He has been described as a man with a piercing intellect. But he is also known to have an aloof, distant management style that may have led to these younger executives assuming a responsibility they were not ready for.

While times were good, all this may not have been such a bad thing. But now, given the losses that have accrued on the watch of these new executives, questions might again arise as to whether Mr. O’Neal has the right management team in place to see the firm through this difficult time in the markets.

Jenny Anderson contributed reporting.

Copyright 2007 The New York Times Company