John Thain's Favorite Part Of Merrill

One thing we've noticed recently is that the chorus of dissenting voices inside of Merrill Lynch has quieted in recent months. In the weeks after John Thain replaced Stan O'Neal as chief of Merrill, the securities firm was bitterly riven as executives scrambled for authority (and, of course, money...always money) under the new regime. But by all accounts Merrill is a quieter, happier place these days.

This is a testament to the effectiveness of Thain's leadership. But we wanted to know: how did he do it? After the jump, we explain why we think something Thain said on Wednesday indicates what happened.

Earlier this week Thain gave an important interview at the Wall Street Journal's dealmaker conference at the Pierre Hotel. (We covered one important aspect of that interview here.) Deal Journal's Heidi Moore noticed that in his speech Thain was clearly playing favorites when he talked about Merrill.

In an interview with Deal Journal's own Dennis Berman at this year's Deals & Deal Makers conference, wealth management was the only division Thain mentioned by name-and he did so three times, all favorably.

John Thain speaks to WSJ Deals Editor Dennis K. Berman during the Deals & Deal Makers conference

His valentines? "Merrill has a very good culture that is the strongest inside the wealth management organization," he said, adding praise later for their experience and competence. In fact, Thain has been exceedingly complimentary of the wealth management team since the beginning: attending their retreat this year and mentioning on conference calls that they were the only part of the company whose compensation wouldn't be overhauled.

Thain's favoritism makes financial sense: Merrill's wealth management revenue was the strongest of any of the company's businesses in the latest quarter.

In contrast, the benighted markets crowd that structured all those CDOs garnered only one, somewhat scornful mention from Thain...

Many believe that the ouster of O'Neal was precipitated not just by the losses it suffered as the subprime mortgage market led to the broader credit crunch, but by O'Neal's plan to merge Merrill and Wachovia. This was seen by the brokers in the wealth management unit as endangering their franchise within the firm, and further evidence that O'Neal didn't respect the herd. In short, O'Neal got stampeded by the herd.

This is a mistake Thain isn't making. Where O'Neal reportedly sought to turn his company into a clone of Goldman Sachs, Thain seems to be concentrating on making Merrill more like Merrill. And the angry voices, many of which were heard from the herd, have grown quiet. So it seems to be working.

John Thain Hearts Wealth (Management) [DealJournal]