Merrill CEO criticizes prior leadership

NEW YORK -- John Thain, presiding over his first set of earnings Thursday as the new leader of Merrill Lynch & Co., cleared the decks with $15 billion of subprime mortgage related write-downs that led to the largest quarterly loss since the brokerage was founded 94 years ago.

And, while it was among the most aggressive moves on Wall Street to deal with bad bets on subprime mortgages, Thain's still not ready to say the worst of the credit crisis is over.

With a possible recession looming, the world's largest brokerage and other Wall Street investment houses might still be saddled with unforeseen turmoil. While taking steps to minimize future disruptions, Thain is still wary about challenges that face the global financial markets.

"We will continue to take risks -- you don't make money if you don't take risk," Thain said. "But the risk will be sized appropriate for the business. Nobody should be taking risks that wipe out the entire annual earnings of a business, and certainly not the entire firm."

That's what happened under former CEO Stan O'Neal, whose heavy bets in subprime mortgage securities backfired as homeowners defaulted on their loans at an alarming rate.