Will the Stress Test Seal Ken Lewis's Fate?

There's more bad news in what is turning into the worst week ever for Bank of America Corp.'s (NYSE:BAC) Ken Lewis. Leaked results of the stress test say that BofA (BAC) and Citigroup Inc. (NYSE:C) will need to raise billions in new capital to ride out the recession.

According to The Wall Street Journal, "the capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said."

The story sent shares of both banks tumbling in premarket trading, damaging the prospects of either bank enticing investors to pony up billions in new capital.

The leak couldn't have come at a worse time for Lewis. With a growing number of shareholders calling for his ouster, the news of a potential capital shortfall is sure to be a major topic at the bank's annual meeting Wednesday. Lewis will not only have to reassure shareholders he's the best man to guide the institution through these troubled times, but will also have to fight off charges that he was aware of the troubles at Merrill Lynch & Co. prior to the merger. Merrill's former CEO John Thain blasted BofA's management Monday, accusing them of making him the fall guy when shareholder anger erupted over $16 billion in fourth-quarter losses at the investment bank that weren't revealed until after the stockholder vote on the deal.

For his part, Lewis has maintained that BofA will not need to raise any more capital and has been touting the lift that Merrill recently provided to the bank's first-quarter earnings, a defense likely to continue as he fights for his job Wednesday. But surviving the annual meeting may not be the last hurdle for BofA's top brass. Treasury Secretary Tim Geithner has said that the administration may replace executives and directors at banks that require "exceptional" assistance, a comment that may apply to Citi and BofA if they return hat in hand after already receiving $90 billion in bailout money between them.

- George White

Comments

[CloroxCowboy:]

Good riddance! Let's get the next batch of slimeballs in there so we can start this merry-go-round up again...

Apr 28 03:14 PM

[McGarnicle:]

Why did the Federal Government insist that Bof A gobble up the Merril losses with Fed. TARP dollars??, and then hide this coercion from the public until after the deal?; when it was public money that was being put up for the deal.
The above article is laughable, as it leaves out the truth; Since these banks are borrowing, or funneling at 0%; It would be hard to believe they will need to raise more capital. This is the result of gov't "stress tests"?, which seems to be language describing Federal pressure being applied to banks in order to acquire political leverage, including positions in upcoming board elections.
Any nation which votes itself into the public kitty jar fails, history preserves the truth on this matter .

McGarnicle

Apr 28 03:20 PM

[epeon:]

Lewis was always going to be the target of some stockholders just because the performance of the stock has been so horrendous. I think this would have been the case no matter who was in the CEO's position. However, when he admitted that he was aware of how bad the quality of the Merril Lynch assets were and, in fact, had intentionally kept the stockholders in the dark about this fact; well, to me that is the same as admitting he behaved fraudently. You can argue that Paulsen and Bernanke were pressuring him to do that. However, all this means to me is that the three were in a conspiracy to defruad the BofA stockholders. I think he needs not only to go, but to be investigated for fraud.

Apr 28 03:23 PM

[Ishortyou:]

The bolsheviks are making the big banks to convert their preferrs to common stock so they can have more voting power in them, it is already been confirmed that this is the intent of the bolsheviks, according to them 'they want to make sure that TARP money is used properly' welcome to the USSR.

Apr 28 04:17 PM

[stockOzone:]

Not ony Ken Lewis but Vikram Pandit too will be shown the exit door. Just wait for May 4.

www.stockozone.com/200...

However, I wonder why they are after Lewis' neck when the real culprit is paulson.

Apr 28 08:25 PM

[Ice:]

What about this rumor; John Thain is asked to prepare himself to step in and take over

Apr 28 10:23 PM

[mac123449:]

According to Reuters, CitiGroup wants to pay bonus to its trading unit employees. For manipulating market and making money using our money. I think is getting very insane. We all have to start revolting for taking our money and the banks making money again playing us and lending the same money to us for 15% interest.

INSANINTY AND FRAUD AT LEVEL BEST AND NO ONE RESPONDING.

Apr 28 10:26 PM

[CJJ:]

Wah, wah, wah...Your money...

I have the Wahmbulance over here to sooth your pain.

Mac, why don't you step in and run Bank of America. I mean your an internet poster. You are really mad. That must make you more than qualified.

Why do we even put dates on things these days? They are worthless. All people do is "leak" information that the lemmings on the web take as fact.

I know its true, I read it on the internet...
-The Angry American Public

On Apr 28 10:26 PM mac123449 wrote:

> According to Reuters, CitiGroup wants to pay bonus to its trading
> unit employees. For manipulating market and making money using our
> money. I think is getting very insane. We all have to start revolting
> for taking our money and the banks making money again playing us
> and lending the same money to us for 15% interest.
>
> INSANINTY AND FRAUD AT LEVEL BEST AND NO ONE RESPONDING.

Apr 28 11:03 PM

[djk!:]

I'd to see Ken Lewis stay and keep saying over and over again that BoA does not need new capital for as long as he can. When he realizes BoA *does* need to raise new capital of course it will be too late for BoA. Mr. Lewis would then have turned out to be the last nail in the coffin for BoA. THAT is how history should remember and write of Mr. Ken Lewis. It's over, Kenny. Good thing you sold the Porsche when you did.

Apr 29 03:01 AM

[User 393414:]

I can't say I like Ken Lewis or his management of BoA (I worked there for 20 years until 2001) however, it would be just like the administration to "leak" false information during the week of the shareholders meeting to get Lewis thrown out. That way the administration doesn't have to take the heat for firing another ceo

Apr 29 10:09 AM