After details of a spending spree became public, Merrill Lynch CEO John Thain has resigned from his post at Bank of America, which bought his firm in the midst of the Panic of '08.

The $1.2 million Thain spent redecorating his office — with expenses like an $87,000 area rug and a $35,000 "commode with legs" — paled beside the $15 billion in losses Merrill reported for the fourth quarter. The losses were so heavy, and so unexpected, that Bank of America CEO Ken Lewis met secretly with government officials and negotiated a new infusion of cash from the government's bailout fund.

But Lewis had stood beside Thain over the credit losses; every Wall Street firm is seeing heavier losses than expected, and there was no evidence Thain knew this was coming. Why do we think the lavish office redo was what did Thain him? His personal reputation for righteousness, which had him hailed as a hero for previous gigs at the New York Stock Exchange and then Merrill Lynch, was ruined by the revelation. And with that, Thain looked like just another overvalued asset on the balance sheet.

We hope Lewis likes the rug. He paid $28 billion for it.

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