Replace Ken Lewis with a Lawyer? What a Swell Idea

A lawyer may be next in line to succeed current BofA CEO Ken Lewis.

Brian Moynihan, the lawyer put in charge of Merrill Lynch & Co. after the ouster of John Thain, is emerging as right-hand man and potential successor to Bank of America Corp. Chief Executive Kenneth D. Lewis.

This is not a shot at lawyers per se. Boards often appoint individuals with a certain skill set to address specific problems. Usually, if a lawyer is being considered CEO, it is because his skills are needed to navigate legal issues the company faces, not because of his business skills. As the article states

Despite limited experience on Wall Street and outsider status at Bank of America, joining as part of its 2004 acquisition of FleetBoston Financial Corp., the 49-year-old Mr. Moynihan has been at Mr. Lewis's side at several important moments of the financial crisis, including during a recent high-profile visit to the White House and a mid-December trip to Washington to tell federal regulators the company might back out of its agreement to buy Merrill.

If Bank of America appoints Moynihan, it is because they feel the need to address the regulatory environment in Washington, not to build shareholder value. Thus, BofA is likely to underperform the bank group over the next several years.

The last lawyer appointed to the position of CEO of a big bank was Charles Prince of Citigroup (C) because of his adept handling of various legal issues Citi had gotten itself into. And we all know how well that worked out.

Comments

[altaman:]

A very good point about how the company may view what it needs for a CEO going forward in terms of a skill set. I do not find it encouraging that the key to success in financial management may appear to be government connections and the ability to negotiate the increasing morrass of poorly considered regulations and wacky bailout programs coming down from the Messiah and company.

Apr 08 08:52 PM

[ebschor:]

You say "If Bank of America appoints Moynihan, it is because they feel the need to address the regulatory environment in Washington, not to build shareholder value. Thus, BofA is likely to underperform the bank group over the next several years."

How the hell do you draw that conclusion? Your assumption is that his legal background is the reason for appointing him as a CEO to navigate Washington. That's crap. They'll have a legal team to navigate Washington and they'll hire a CEO to navigate BAC. It's not like the CEO does EVERYTHING.

You probably are kicking yourself for not buying in the low $3/share range and are hoping a crappy article like this will get everyone to sell their shares.

BAC is on the mend. In 2011 they'll be doing $30 billion in earnings on 6 billion shares. $5/share in earnings. $7/share will be a dream in 2011.

Apr 08 09:01 PM

[Rigged:]

Your post lacks any basis or support facts. If you can point out what Moynihan's weaknesses (or lack of experience) are then you can make your point. Just because one is a lawyer does not mean that one does not have any business sense or one does not have any leadership abilities. There is nothing in your post to support that Moynihan is not up to the task...except for being a lawyer. What if a lawyer has technical degree and an MBA and also has run a bunch of businesses? Do you homework please.

Apr 08 10:13 PM

[zaki khan:]

The Lawer that is a diffrent field we dont need lawyer we need a banker who have experiance about the bank and there clints
Ken Lewis is perfect person for Ceo job.replace his is a big mistake
under his management bank of america will beck to profitable very fast
all his life he work very hard you should go to bank of america web side and see his history he get two time award banker of the year
all share holder knows there is no any replacement of ken lewis.

Apr 08 11:18 PM

[THofler:]

I have a long position in BAC and am hopeful for the long term. But I agree with the author.

Mr. Lewis has had a problem with OCAD (obsessive compulsive acquisition disorder) and has lead BAC down the path towards a Citigroup-like financial services supermarket model. Many have assumed that the Citi experience proves that this can't work.

I blame Chuck Prince for much of the Citi failure; a failure to integrate and cut costs. BAC has a well deserved reputation for being the best at integration and cost cutting, and I credit Mr. Lewis for much of that reputation. Mr. Lewis can still pull off the huge integration challenges that lie ahead, but only if he is still at the helm.

Who knows what Mr. Moynihan's capabilities are? He may have been smart enough to have avoided the whole Merrill fiasco. But it would be a miracle if he could match Mr. Lewis' abilities in integrating and cost cutting. And it is not as though he has the luxury of wasting 6 months getting his feet wet.

Oh yeah, and Moynihan is a lawyer just like Prince. That just throws a little extra stink into the equation in my opinion. We are supposed endure this monkey wrench in the BAC works for the sake of political scapegoating. Or maybe the White House just wants to give Citi and JPM a leg-up by hurting BAC.

Apr 08 11:20 PM

[User241885/...:]

It would probably be helpful if someone actually discussed the specifics of Moynihan's CV rather than making useless generalizations about the value of having a lawyer in the CEO role.

Moynihan started his career as a corporate lawyer in Rhode Island where he worked on the Fleet Bank assignments which in the late eighties and forward became more and more about acquisitions which launched the career of then Fleet CEO Terry Murray.

Murray brought Moynihan on board because the lawyer showed an relentless abililty to execute Murray's vision of acquiring more and more regional banks (ultimately leading to the take-overs of Shawmut and Bank of Boston). There are stories claiming that Moynihan would call his professional colleagues at 3AM to discuss particular aspects of the deals.

Whether these transactions were really beneficial to the banking system is anyone's guess but they establish Moynihan as someone who epitomized the concept of strategic scaling up.

When Murray stepped down, Moynihan worked on several similiar strategic initiatives for both Fleet and finally Fleet's own acquirer, The Bank of America, with the most important task being the intergration of many different private client groups inherited from each successive takeover, culminating with US Trust.

Again, I would leave it to the reader, or even better the private clients at BofA, to decide how well this execution of the scaling up strategy has worked. Having been in this world for 30 years, I believe that awarding a D would be a good example of grade inflation.

"Scale" has been the strategy for all of the financial intermediaries, the commercial bank and trust companies, the investment banks and the insurance companies the last twenty years. Like derivatives themselves, they depend on a good business environment , low interest rates and the existence of a ready, willing and able buyer standing next in line.

Rather than hang the lawyer rap on the candidate, shareholders should judge for themselves whether the architect of the strategy of scale should get the nod.

Apr 09 09:49 AM

[HBWOW:]

Lewis out, the earlier the better, with only the shirt on his back. Frankly he should be sued for malfeasance of office and for most of what he has received from B of A. As for replacement, a proven heavily experienced accountant/manager who would get a firm grip on what the bank's assets are, make needed adjustments, and move forward. Lewis does not even appear to be in charge as he doesn't appear to know the bank's real position/status. GLIB, GLIB as experienced with his knowledge and handling of the bank's last two infamous acquisitions.

Apr 09 12:05 PM

[User241885/...:]

I am in total agreement with HBWOW. Lewis appeared on the cover of Fortune Magazine in November of 2007. His message to the public and shareholders was that the bank had nothing to fear regarding sub-prime real estate and related derivatives. Again this was November 2007.

Anyone paying attention would have to wonder how this could be when HBSC just three months earlier had announced record losses of 1B in the second quarter and upwardly revised their loss estimates to 3B for the next two quarters.

Lewis later went ahead with the CountryWide deal in the midst of this landscape, rather than step back from it or at very least ask a significant renegotiation of the terms. He clearly hurt both the bank and its shareholders with his obsession of being number one in real estate lending in face of clear evidence that this was exactly the wrong time to do so.

The final insult to shareholders was Lewis's highly public comment that he knew nothing about the Merrill bonuses when his signature was on the very document approving them. Thain's reasoning for the approval and the timing of the bonuses can be argued, but Lewis' chronic duplicity cannot.

Again, I agree with HBWOW. If this does not consitute a case for malfeasance of office, the legal cause of action does not exist.

Apr 09 01:56 PM

[FloridaBoy2:]

I don't think Lewis was told the truth about the derivatives and I doubt he, or any other CEO, understood the risk. BOA may have been better off today if the acquisition binge was avoided. Today they announced that they may close 10% of their retail offices. BOA has a lot of baggage to deal with but it will survive.


On Apr 09 01:56 PM User241885/(FAMCO) wrote:

> I am in total agreement with HBWOW. Lewis appeared on the cover of
> Fortune Magazine in November of 2007. His message to the public and
> shareholders was that the bank had nothing to fear regarding sub-prime
> real estate and related derivatives. Again this was November 2007.
>
>
> Anyone paying attention would have to wonder how this could be when
> HBSC just three months earlier had announced record losses of 1B
> in the second quarter and upwardly revised their loss estimates to
> 3B for the next two quarters.
>
> Lewis later went ahead with the CountryWide deal in the midst of
> this landscape, rather than step back from it or at very least ask
> a significant renegotiation of the terms. He clearly hurt both the
> bank and its shareholders with his obsession of being number one
> in real estate lending in face of clear evidence that this was exactly
> the wrong time to do so.
>
> The final insult to shareholders was Lewis's highly public comment
> that he knew nothing about the Merrill bonuses when his signature
> was on the very document approving them. Thain's reasoning for the
> approval and the timing of the bonuses can be argued, but Lewis'
> chronic duplicity cannot.
>
> Again, I agree with HBWOW. If this does not consitute a case for
> malfeasance of office, the legal cause of action does not exist.

Jul 28 07:40 AM

[Personal In...:]

I agree with the author. Interesting article.

Jul 29 10:06 AM

[barbara789:]

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Barbara
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Nov 09 04:51 AM