CIT Group's board of directors has selected John Thain, the former chairman and chief executive of Merrill Lynch, as its chairman and CEO, effective immediately.

Thain, 54, succeeds director Peter Tobin, who took over as acting CEO following the retirement of Jeffrey Peek. Tobin will continue to hold a seat on CIT's board.

Thain departed Merrill after the firm was sold to Bank of America last year. Prior to joining Merrill in 2007, he was CEO of the New York Stock Exchange and spent most of his career at Goldman Sachs, where he became president and chief operating officer.

According to a Securities and Exchange Commission filing, Thain will receive an annual salary of $500,000 in cash and $5.5 million in stock ($2.5 million of his stock holdings are subject to a one-year holding period and the remaining $3 million will be held for three years).

The CIT board is expected to award Thain a long-term incentive payment of up to $1.5 million in stock this year; all such payments are "subject to clawback, including for unnecessary and excessive risk." In addition, CIT will reimburse Thain up to $35,000 for legal fees incurred during his employment negotiations.

"John is a well-respected financial services executive and proven leader who is uniquely qualified to lead CIT at this critical stage," Vice Admiral John Ryan, CIT's lead director, said in a press release. "CIT and its customers will benefit enormously from his breadth of experience, industry acumen and deep knowledge of the financial services sector. We have the utmost confidence in John and are pleased to welcome him to CIT."

Thain said in the release: "Much has been accomplished in recent months to position CIT for renewed success. We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs."

The 102-year-old lender to small businesses emerged from bankruptcy in December. The company has also been reorganizing its board of directors. Its chief financial officer, Joseph Leone, will retire on April 30.

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