All the Devils Are Here [145]
Fleming’s first instinct was to try to get the decision reversed. He asked O’Neal to move Kronthal and his team to Fleming’s jurisdiction and let them continue to run the credit desks. After thinking it over, O’Neal said no; Fleming recalls an early morning phone call from O’Neal in which he told Fleming he needed “to play ball.” When Fleming asked O’Neal why Kronthal had to be fired, O’Neal replied, “You don’t understand. Dysfunction is good on Wall Street.” Dow Kim told Fleming that under no circumstances was he to give Kronthal advance word that he was being let go. That was Kim’s job, and he would be doing it soon enough.
It was the middle of July 2006. Fleming and his wife were in London. When they were out shopping one day, Fleming’s cell phone began ringing and ringing. It was Kronthal. At first, Fleming ignored the calls, but as they kept coming his wife asked him what was going on. When he told her, she urged him to stop ducking the calls and talk to his friend. Kronthal told Fleming he was hearing rumors that he and many of Merrill’s veteran traders were all going to be fired. Fleming hemmed and hawed, but by the end of their long, anguished, teary conversation, Kronthal knew that the rumors were true.
Fleming didn’t speak to O’Neal for a month and a half. The ice was broken only when O’Neal pleaded with Fleming not to leave the firm, something he had been contemplating. Fleming did stay—in fact, he stayed right through the financial crisis, becoming Merrill’s president along the way and brokering the deal Merrill cut with Bank of America on the infamous “Lehman weekend” in mid-September 2008. But the Kronthal firing was something he never stopped thinking about. Not only because it betrayed “a lack of basic human dignity,” as Fleming would later put it. And not only because it was so unnecessary. To Fleming, that July day in 2006 when Kronthal and his team were fired was the day Merrill Lynch’s fate was sealed. Yes, Fleming knew he was biased, but given what later happened, it seemed irrefutable. Prior to that day, Merrill may well have avoided the subprime problems that would soon bring Wall Street to its knees. After that date, Merrill was doomed to make the same mistakes as most of its competitors.
“It was one of the dumbest, most vindictive decisions I have ever seen,” Fleming would later say. And he was right.
The reason Jeff Kronthal had to be fired was that, several months earlier, O’Neal had been persuaded to bring in a fast-rising bond salesman named Osman Semerci and give him a title—global head of fixed income, currencies, and commodities—that effectively made him Kronthal’s boss. Semerci, a thirty-nine-year-old British citizen of Turkish descent, had a reputation for being extremely driven and extremely aggressive—exactly the traits O’Neal wanted on the trading desks. Semerci wouldn’t be afraid to take big risks to generate big profits. He wouldn’t be excessively cautious the way Kronthal sometimes was.
Semerci also had a reputation for being a mean boss, which O’Neal didn’t mind at all. “He was in your face,” says a former Merrill executive. “He had a reputation internally that if you got on his bad side, he would write your name down and look for a chance to get you.” Merrill traders used to call it the blacklist; Semerci would actually walk the floors with a pen and clipboard in hand, writing down things he didn’t like.
Semerci was also someone who couldn’t tolerate anyone who might be a threat to him. Kronthal, the most respected trader at Merrill Lynch, certainly fit the bill. So as a condition of taking the promotion, he insisted that he be able to fire Kronthal and those close to him, and assemble his own team of executives and traders. O’Neal assented. He also