CIT will pay Mr Thain $6m (3.8m pounds) a year - $500,000 in cash, $2.5m in stock to be held for one year, and $3m in stock to be held for three years.

Mr Thain resigned from Merrill just after it merged with Bank of America at the start of last year.

He was criticised for allowing big bonuses despite Merrill's hefty losses.

These were paid out just days before the takeover by Bank of America.

Bad loans

"John is a well-respected financial services executive and proven leader who is uniquely qualified to lead CIT at this critical stage," said board member, John Ryan.

The new boss said the firm was well-placed, despite its recent troubles.

"The company's numerous market-leading positions are evidence of the resiliency of the franchise and its unwavering commitment to customers," Mr Thain said.

CIT suffered in the recession as its many bad loans were exposed. It filed for bankruptcy protection on 1 November last year after failing to restructure its debt.

The company emerged from protection just a few weeks later.