Replace Ken Lewis with a Lawyer? What a Swell Idea

Apr. 8.09 | About: Bank of (BAC)

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 (NYSE:C) because of his adept handling of various legal issues Citi had gotten itself into. And we all know how well that worked out.