TO be offered one of the toughest jobs on Wall Street is an opportunity afforded to few; to be offered two at the same time is extraordinary.

When investment banks Citi-group and Merrill Lynch realised the extent of their financial troubles at the end of last year they both had one man’s name at the top of their short lists: John Thain, Wall Street’s “Mr Fix-it”.

In the end, the former co-president of Goldman Sachs turned down Citi and accepted the role of chairman and chief executive at Merrill. His rivals say he picked the right job. “Citi still has big problems; Merrill is a simpler story and it is fixable,” said one.

In the process Thain, 52, has collected a generous golden handshake - he was paid a $15m (£7.4m) bonus for leaving his job as chief executive of the NYSE Euronext – and an option package that could vest tens of millions of dollars. It’s been nearly 70 days since he took on the job and so far he has managed to patch up Merrill’s wounds with more than sticking plaster.

He has tapped into the cash-rich sovereign funds to raise $13 billion in new capital. And in January Thain attempted to clear the decks at Merrill with some $15 billion of sub-prime mortgage-related write-downs - the largest quarterly loss since the broker was founded 94 years ago.

He accepts there could be more write-offs, but they are unlikely to be on the same scale. In an exclusive interview with The Sunday Times, he said: “We didn’t write them to zero, so we still have some risk on our balance sheet; we are in the risk-taking business, but we took what we thought were conservative assumptions at the time and we don’t have anywhere near the type of exposure that we had at the end of the year.”

He has also overhauled risk management, to ensure the same mistakes are never repeated. Now he wants to focus on rebuilding the firm, and last week he was in London to lead a two-day board strategy meeting, where a large part of the agenda was occupied with finding ways to further exploit growth opportunities in its international wealth-management and banking businesses as well as explore the synergies between them.

“When we sell a company or take it public, that’s a wealth-creat-ing moment that can convert into an opportunity for our wealth-management business. And on the flip side, our wealth-manage-ment team know lots of people who own companies that can be taken public or sold,” he said.

The plan is to take these operations as well as the equities and fixed-income arms further into the Middle East, Russia, India, China and Brazil. “In terms of growth, we will focus our opportunities outside America because that’s where the world’s economy is growing. If you exclude our high-net-worth business, about 60% of our revenues are already generated overseas,” he said.

China is one of the biggest opportunities, but Merrill has to apply for a licence to operate there, a process that it is about to start. Another area where Thain wants to concentrate is operating as a single firm across the group.

The biggest implication of this is how staff – there are some 8,000 in London – are remunerated. “Over the last few years Merrill had moved to compensating people more on their individual businesses and I want to move towards paying them on the basis of how well the firm does first and also paying them using equity so they have a longer-term perspective,” he said.

Thain is not preparing for a wave of redundancies, even if America does enter recession. He said: “We won’t overreact to that, we’ll be prudent in managing our expenses but we want to maintain our strategic direction.”

He takes a dispassionate view of the financial meltdown on Wall Street. “This was a liquidity bubble, there was too much of it available at too low a cost and that caused excesses to occur in a number of areas,” he said.

“Mortgages were originated with higher and higher loan to values with lower and lower quality standards. That same liquidity bubble can be seen in the leveraged loan market, where debt became a greater extent of the total deal; that led to ‘cov-lite’ loans and whenever someone starts to give a name to a particular type of lending, that should be a warning sign.”

Cov-lite (covenant-lite) loans are those that do not have all the covenants that usually protect banks when lending to companies.

Thain is not predicting a quick cure. As well as the inevitable lawsuits, problems in the capital markets will not go away. “This has not bottomed out yet. We’re beginning to see credit issues in all forms of consumer lending, from auto loans to credit cards and in consumer lending. This is going to be a concern for some foreseeable period,” he said.

Part of the blame must be laid at the door of the rating agencies, Thain said. “There has to be some fundamental change in how structured credits are rated. I don’t think there has been any serious degradation in the ratings of corporates, but these were highly structured transactions where the underlying collateral was actually a derivative itself,” he said.

However, Merrill and its Wall Street rivals are not blame-free. Thain accepts there will be a wave of lawsuits as people seek compensation for their losses.

Thain also attempted to ease concerns that the Northern Rock crisis and the British government’s decision to change the taxation rules for nondomiciles has somehow damaged London’s reputation as a global financial centre. Given his role at the NYSE, which lost a succession of big-name floats to London, his views are reassuring.

“London is a very competitive financial centre to New York. It is probably still New York, then London, but London has been making very serious inroads into financial services and many of the investment banks have a significant portion of their derivative operation over here.”

The turnround of Merrill could be Thain’s last big show. But for a man with little experience of running a global firm employing 64,000 people, it won’t all be smooth sailing.

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