Leave your feedback Share Copy URL https://www.pbs.org/newshour/show/record-loss-mortgage-crisis-spur-merrill-ceos-exit Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Transcript The chief executive officer of brokerage giant Merrill Lynch, Stanley O'Neal, stepped down Tuesday after the company posted a record quarterly loss and questions arose over decisions to invest in the troubled mortgage market. Analysts discuss O'Neal's downfall and what it means for the business world. Read the Full Transcript Notice: Transcripts are machine and human generated and lightly edited for accuracy. They may contain errors. GWEN IFILL: Now, the troubled mortgage market claims its biggest corporate victim to date. Jeffrey Brown has that. JEFFREY BROWN: Last week, Merrill Lynch CEO Stanley O'Neal announced that the hit his firm has taken from the so-called subprime mortgage crisis was far greater than previously thought, about $8 billion in the third quarter of this year. Today, the world's largest brokerage firm followed up with a new announcement: O'Neal himself was out.We look at this ousting and other fallout with Roben Farzad, Wall Street and markets editor for BusinessWeek magazine, and Samuel Hayes, professor emeritus of investment banking at Harvard Business School.Roben Farzad, just a few weeks ago, Stanley O'Neal had talked of big losses and then suddenly they were huge losses. What happened? ROBEN FARZAD, Editor, BusinessWeek: It illustrates just how deeply this housing market has declined and even blindsided people on Wall Street. The firm really blindsided the street earlier this week by announcing its largest quarterly loss in history. And Stanley O'Neal largely fell on his sword, and he said, "I'm responsible," but unfortunately when your stock is down 33 percent, and the troops are very worried about further upcoming losses, they were out for blood. And in short order, they ousted him. JEFFREY BROWN: Professor Hayes, how do you not know that you're losing that much money? SAMUEL HAYES, Harvard Business School: Well, you don't know if your own people who are specialists in the area don't know. And those people, who were the investment bankers and the traders, who were running the collateralized debt obligation part of the business, didn't know themselves. JEFFREY BROWN: Tell us a little bit more, staying with you. These are clearly very risky investments, but make the connection for us from the mortgage lending crisis to the losses at Merrill Lynch? SAMUEL HAYES: Well, they had been the number-one underwriter of these kinds of new issues of derivative securities for almost two years and had realized huge profits in the form of fees that they got for being the number-one underwriter, some $800 million.And in the course of selling these underwritten issues, they still had a good bit of inventory of some of the securities they couldn't sell easily, so they had them in their inventory. They had over $30 billion in their inventory.And since these things don't trade very often, it's hard to get a really good price on them. And when they finally did get prices, they found that the securities weren't worth $30 billion; they were worth closer to $20 billion. So that was the process.