UPDATE 2-CIT in talks to hire Thain as CEO -- sources
* Deal to hire Thain could also include Nelson Chai-source
* Thain and CIT CEO Peek both worked at Merrill Lynch (Adds background on CIT restructuring plan)
NEW YORK, Jan 12 (Reuters) - CIT Group Inc (CIT.N), a commercial lender that recently emerged from bankruptcy, has talked to former Merrill Lynch & Co Inc Chief Executive John Thain about him taking the company's reins, according to two people familiar with the matter.
A deal to hire Thain could also include Nelson Chai, who worked with Thain at Merrill and also NYSE Euronext NYX.N, one of the people said.
Thain would follow another former Merrill Lynch executive, Jeff Peek, who retires as CIT's CEO on Jan. 15.
The search for a replacement for Peek is progressing, a CIT spokesman said. He declined to comment on the report, citing a company policy not to comment on market rumor or speculation.
A spokesman for Thain also declined comment.
Thain was fired from Bank of America last January, a few weeks after the Charlotte, North Carolina-based bank bought Merrill. He told Reuters in November he was looking for a job in private equity or with a public company. The MIT and Harvard-educated executive joined Merrill at the end of 2007 from the New York Stock Exchange. Before heading to the NYSE, Thain spent nearly a quarter century at Goldman Sachs Group Inc (GS.N), where he became No. 2.
CIT is looking to reestablish itself as a lender to small and medium-sized businesses after a disastrous foray into subprime lending earlier this decade.
The lender filed one of the five largest bankruptcies in U.S. history on Nov. 1 after a debt exchange offer failed. One of the biggest financial sector victims of the credit crisis, in December CIT became the only major company in the sector to emerge from bankruptcy.
CIT is looking to move some of its best businesses, including vendor financing and factoring, to its bank, where it can fund them with deposits.
Any new chief executive will need to work hard and negotiate with regulators to put this plan into effect, one person familiar with the business said.
Separately, the company named three new directors on Tuesday, completing a planned reshuffle of its board.
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