by Patricia Sellers
As CIT gets a lifeline to stave off bankruptcy–a $3 billion deal with bondholders is reportedly in the works–the CEO who got the company into trouble is hanging on. But Jeff Peek’s reputation is in tatters.
This is the third time in eight years that Peek has failed to grab the golden ring and redeem his reputation. First at Merrill Lynch, then at Credit Suisse Group, and now at CIT, Peek showed a naivete, along with a tendency toward inaction.
That combination of leadership flaws did him in each time.
At CIT, many of Peek’s missteps related to ill-conceived expansion into subprime mortgages and student loans. But his latest and greatest error was trusting that the government would deem CIT “too big to fail” and give it desperately needed capital, on top of $2.33 billion in TARP funds. As the global financial crisis worsened and banking rivals raised money from private investors, Peek waited and focused on lobbying Washington. The government refused to rescue CIT. Now Peek will likely rely on an expensive and onerous bond deal that some analysts believe will simply delay the company’s bankruptcy.
Naivete certainly characterized the end of Peek’s career at Merrill Lynch, where he grew up in investment banking and spent most of his career. Peek had hoped to be CEO of Merrill–and believed he had the backing of chief executive David Komansky and the board. But the board promoted Stan O’Neal, a fierce cost-cutter, instead. “I won the popular vote and lost in the electoral college,” Peek told me in 2003. “I’ll pay more attention to the board of directors next time. When my CEO says, ‘Don’t worry, I will worry.” (O’Neal, practically Peek’s polar opposite, got rid of Merrill’s old guard, including Peek, and spread so much fear across the company that the board ousted him in 2007.)
Eager to hold a major leadership position, Peek landed at CSFB, where CEO John Mack, whom he had never met before, had gone in 2001 to revive his own career. (Mack had quit Morgan Stanley, where he’s now CEO, over a power struggle with then-chief executive Phil Purcell.) Moving to CSFB turned out to be an ill-fated decision for Peek, who was well-liked and ever polite but paled as a tough decision-maker next to the impatient, hard-charging Mack.
Overseeing asset management, Peek sought to build the business. His responsibility shrank, however, as Credit Suisse sold Pershing, a stock clearing-house, that he and Mack both lobbied to keep.
“I didn’t come to be here for 18 months, I came to be here for the rest of my career,” Peek told me in July 2003 as he was leaving CSFB and heading to CIT as president, with his sights set on the CEO job there. “This gives me the chance to run my own show,” he said of his new job at the finance giant, never imagining what trouble he would encounter there.