Merrill’s O’Neal Speaks: Some Regulatory Action Politically Motivated

In a rare public appearance Thursday, Stan O’Neal, chairman and CEO of Merrill Lynch, took indirect aim at regulators and perhaps even New York State Attorney General Eliot Spitzer in particular.

In a rare public appearance Thursday, Stan O’Neal, chairman and CEO of Merrill Lynch, took indirect aim at regulators and perhaps even New York State Attorney General Eliot Spitzer in particular.

Speaking at Pace University’s annual Securities Industry Conference, O’Neal was asked by moderator Paul Steiger, managing editor of The Wall Street Journal, about his thoughts concerning the recent scandals in the securities industry. After saying the industry “didn’t realize the extent in which we had breached the faith of the public, which created more of a backlash than there would have been otherwise,” O’Neal went after unnamed regulators.

“In addition, this is a situation that has been, to be honest, exploited from a political point of view and expanded to a point past what it should have been,” O’Neal said.

Steiger, following up, asked O’Neal his thoughts on Spitzer. O’Neal, through clenched teeth, said Spitzer has put a spotlight on some “bad practices,” and that was “important.” Steiger continued: “Yes, but would you say that Spitzer is one of those people who have exploited the situation for political gain?”

O’Neal paused, then smiled. “No comment,” to laughter from the crowd.

The session kicked off the 11th annual conference and was essentially a question-and-answer session between Steiger and O’Neal.

Among the topics covered in the conversation:

Of Merrill Lynch’s cost-cutting, O’Neal said: “It’s a mistake to say that if you cut costs, you’re hurting growth. There was a clear cost structure (at Merrill) that had gotten overblown. During a boom, it’s easy for an organization to lose discipline and build up costs that don’t have much use. Time, I think, has proven the moves correct.”

The potential of Merrill Lynch being purchased or merging with a bank: “There was a story about this in The New York Times that was largely speculative and had no new facts or info. We don’t need a larger balance sheet to be competitive. As a shareholder, I can’t say 100 percent that there’s no way we’d be sold [over the next two years] … but I seriously doubt it. I like the job I have. We feel we can create more value the way we are rather than aligning with someone else. As long as we can continue to say that, we will remain independent.”

On recruiting: “We’ve stopped hiring from competitors and prefer to enroll people in our training program. The price of hiring brokers was outpacing economic sense. We revamped the compensation plans, and revamped our entire training program. We’re pleased with the results.”

On hedge funds: “Most of hedge funds are a lot less leveraged than they were 20 years ago. I’m not a fan of regulating hedge funds. We have to be diligent about who we market our hedge funds to.”

On rumors that he could be tapped to be Secretary of the Treasury if President Bush were re-elected: “I’ve heard those rumors. I wouldn’t want to do something like that to the American people.”

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