It would be nice to think that John Thain, wonder boy from Goldman Sachs (GS) and NYSE (NYX) can do a lot over the next couple of months to "fix" Merrill Lynch (MER). But, the board and senior management in the risk and bond areas have probably done what can be done to stop the bleeding. If there are other CDOs or LBO loans on the books, Thain cannot erase them. If there is another write-down to be taken, he will probably take in in the fourth quarter and try to begin with a fresh start.

The word of out Merrill is that the brokerage network of 16,000 stock and bond salesmen would like better representation in the executive washroom. Thain is certainly smart enough to do that.

Thain will also probably purge a number of people in departments that are not as productive as they were a year ago. Any smart manager would do the same. Nothing special to it.

What Thain is really facing is something that his board and managers cannot fix, and that is Merrill Lynch’s reputation. Building a company’s reputation can take years. In the case of Merrill it has been done over decades.

As the management at places like Ford (F) has figured out, being around a hundred years and being an icon of American industry buys you nothing when the chips are down and Wall St. thinks the company screwed up. Yahoo! (YHOO) is in that position now. And, to some extent Microsoft (MSFT) may just be emerging from the reputation Siberia.

The hard part for Thain, and the part which will take the longest, is to convince investors and customers that Merrill Lynch is not a careless and chaotic place. It is what it started out to be, a company that did all it could to protect customer capital.

Thain has the look of a choir boy. Now he has to prove that he is one.

Douglas A. McIntyre

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