Bank of America's Lewis Goes Packing

Finally, the heads are rolling again on Wall Street.

The news that Ken Lewis is stepping down as CEO of Bank of America (BAC) at the end of the year could be a sign that the boards of giant banks are holding executives responsible for their bad decisions, which nearly brought the world banking system to its knees. Indeed, it may be a bad omen for Vikram Pandit of Citigroup (C).

In the case of Bank of America, its board may have grown weary of seeing its chief executive make repeat appearances before Congressional panels to testify on the bank’s controversial acquisition of Merrill Lynch.

The board also may hope that in pushing Lewis aside, it will be able to reach a settlement with the Securities and Exchange Commission over the failure to disclose the setting aside of millions of dollars in bonuses to Merrill employees in advance of the shareholder vote on the merger.

With Lewis gone, U.S. Judge Jed Rakoff might be more willing to sign off on a deal. On a number of fronts, BofA will be better able to move forward with Lewis gone. Lewis himself will probably be better off — there have been few photos of the CEO where he doesn’t appear to be grimacing.

Lewis’ decision has left the Charlotte, North Carolina-based bank with no obvious successor to fill his shoes. That’s why his retirement won’t take effect until the end of the year — assuming a successor is named by then.

David Hendler, an analyst with CreditSights, says:

It’s kind of surprising they don’t have someone lined up. But this whole last year or two for Bank of America has been like a film noir.

A bad film noir, that is. Indeed, Lewis’ departure will be welcome news to many shareholders, still smarting over the bank’s ill-conceived deal for Merrill just as the financial system was melting down.

But he has left a messy succession process for Bank of America. Contrast BofA’s situation — where six internal candidates may be battling it out for the job — with the orderly transition at Morgan Stanley (MS), where John Mack is being replaced as chief executive by James Gorman.

The uncertainty over BofA underscores why Jamie Dimon was right to start the succession process at JPMorgan Chase (JPM) early in presenting Jes Staley as a potential candidate.

In a note to employees, Lewis said that it “was my decision and mine alone” to leave the bank. That may be, but his departure will only serve to focus regulators’ attention on the CEO of the other troubled banking behemoth, Citi.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, is no fan of Pandit’s. So much so, that Bair didn’t even meet with Pandit during the summer while she was agitating for management changes at Citi.

The way things are looking, Lewis may soon have another golfing buddy with plenty of time on his hands.

Comments

[john s. gordon:]

relentless dealmaking by lewis led to disaster eventually.
> jack

Oct 01 08:50 AM

[TeresaE:]

Two departures of high profile leaders, both with huge golden parachutes and their cashed out stocks.

Can't we smell the coffee?

Probably not.

The real crash appears to be in place for early next year. Hang on folks, it is going to be a bumpy ride.

Oct 01 09:06 AM

[funfun:]

Lewis's legacy?

Leaves behind a fraud-infested bank stained with serial scandals, and millions of alienated bank and brokerage customers, tens of thousands of sacked employees, and BAC shareholders whose investments have been dramatically debased.

Lewis also leaves with a massive personal fortune paid to him in return for undeniably shabby "leadership" performance!

...funfun..

Oct 01 09:18 AM

[Graham and ...:]

"relentless dealmaking leads to disaster eventually." Period.


On Oct 01 08:50 AM john s. gordon wrote:

> relentless dealmaking by lewis led to disaster eventually.

Oct 01 09:42 AM

[HBWOW:]

How can our "government" let Lewis walk (or run) away with his pockets full of our money. No prosecution, no payback of ill gotten
gains, no jail - white collar crime again goes unpunished ?????!!!!!!

Oct 01 10:05 AM

[Emerald:]

Many people don't want "government" messing with private enterprise. It's not a crime to run a company into the ground to max out your ego. Boards go along for the ride because the CEO picks most of them and they like the perks. Lewis should be fired "for cause" and shown the door without the bag of gold. Don't worry, the government is bought and paid for by corporate lobbyists and won't touch these clowns. All the members of the Senate and House Finance Committees have their reelection campaigns funded by the "too big to fail club".

I'm still waiting for the givebacks from the former CEO's of Merrill, Citi, Lehman, Countywide and Bear Stearns. Meanwhile the crazy cable guys are ranting against our elected represenatives and telling us the world is coming to an end. Rarely a word against corporate socialism where the taxpayers eat the losses. Sad


On Oct 01 10:05 AM HBWOW wrote:

> How can our "government" let Lewis walk (or run) away with his pockets
> full of our money. No prosecution, no payback of ill gotten
> gains, no jail - white collar crime again goes unpunished ?????!!!!!!

Oct 01 10:50 AM