Why Give Ken Lewis a Break?

Tom Lindmark says I should give Ken Lewis a break:

Felix Salmon made a good point in a post yesterday when he said that running a mega bank was not something that any individual was capable of doing…

While Felix thinks that bank CEO’s cannot positively influence the outcome of their institutions, he seems perfectly willing to assert that they can destroy the bank. This makes no sense logically but it does typify the sort of disparagement that has been dealt out to Lewis and others.

I do think that the importance of CEOs is often overrated, but of course Ken Lewis is and was entirely capable of destroying shareholder value. One of the ways he did that was by growing Nationsbank, by acquisition, into a bank which is now too big to manage or effectively run. Another way he did that was by buying Countrywide and Merrill Lynch.

Conversely, there are ways for bank CEOs to protect shareholder value. In an interest-rate environment like the one we have right now, banks will be steadily and highly profitable on a week-to-week basis. The job of senior management is to keep an eye on the risk book, and make sure that no one is taking outsize risks which can’t be managed. Goldman Sachs and JP Morgan are both very good at this. Ken Lewis was always very bad at that aspect of the job: when things started heading south in the housing market, he decided the best thing to do was to redouble his housing bets by buying Countrywide.

Lindmark suggests that the disparagement of Lewis is snobbish NYC elitism:

Lewis’s real problem was never about his ability to run a bank but rather about his looks, demeanor, background and geographic location. He isn’t Jamie Dimon smooth and he looks like a man either in a permanent state of confusion or one about to rip out a subordinates throat. He never made any bones about his middle class background nor about his strong desire to succeed and running a bank based in Charlotte automatically knocks you down a lot of pegs in the viewpoint of the New York crowd.

Jamie Dimon bought Bear Stearns and got a sweetheart deal from the government to make it work. Ken Lewis bought Merrill Lynch and went back after the fact to get their backing. Little is said of Dimon’s deal while Lewis is vilified for everything connected with the Merrill acquisition.

This is ridiculous. People hate Lewis because he’s middle class? Er, no. Because he’s ambitious? (And Dimon isn’t?) Because he’s based in Charlotte? Come on. They hated on Stan O’Neal and Dick Fuld and Jimmy Cayne and Chuck Prince just as much, and they were based in New York.

As for Ken Lewis getting more grief for buying Merrill than Dimon has got for buying Bear, well, yes. Lewis overpaid massively for his failing investment bank, while Dimon got the Federal Reserve to subsidize his purchase to the tune of $29 billion. Both CEOs are ambitious, but only one let his ambition get the better of him. And he’s the one who just resigned.

Comments

[Angry and d...:]

Hard not to compare their weekends' work: Dimon buying Bear for nothing and Ken Lewis buying ML for a premium when waiting until Monday, it would have been free. The guy who earned his bonus and didn't get it was John Thain - he served his ML shareholders very well, indeed. Wish Ken had really been ready to run with the big dogs...

Oct 04 05:09 AM

[Ricard:]

"This is ridiculous. People hate Lewis because he’s middle class? Er, no. Because he’s ambitious? (And Dimon isn’t?) Because he’s based in Charlotte? Come on. They hated on Stan O’Neal and Dick Fuld and Jimmy Cayne and Chuck Prince just as much, and they were based in New York."

The answer is: They hate Ken Lewis because he failed. Any reason is right given the prior statement. They hate Stan O'Neal because he failed. They hate Dick Fuld because he failed. Chuck Prince, Alan Greenspan, George W? Failed.

Very few people really care what the reason is, as long as 'it' succeeds when they want it to. When 'it' fails, their lack of attention manifests itself in inane discussions such as this.

Oct 04 12:22 PM

[tommiegun:]

Any president of the banking world is going to have his faction of backers and distractors.

Ken Lewis is the president of the "banking world", the top guy. Unfortunately his company epitomizes the crisis of the financial world and america in general ie. a breakdown in the financial fiber of america caused by real estate excesses, which brings the ire of america.

The big problem for Ken Lewis was that after he made mistakes, his shareholders are bitter about as they still suffer with loss of value and the government will not let the wound heal.

The mistake for the gov't is that they would not let up on Lewis to allow him to run BOA and pay us back the $45 billion and that is the worst mistake that has been made this year 2009 vs. 2008.

So the reward for the dumbest mistakes in the last 2 years read like this:

Ken Lewis 2008

And the dumbest of all time goes to the US oversite committee- dumb congressmen and senators who could run a company for any amount of money:

Congressman Towns
Senator Kuzinenich
Senator ISSA
ATTG Cuomo
The biggesst Idiots of all time.

Oct 04 02:06 PM

[THofler:]

The huge & overlooked part of the BofA mess is that John Thain misrepresented the health of Merrill to BofA and thereby violated SarbOx. He should be prosecuted under SarbOx. Stop harping on Lewis and focus on the problem, namely Thain.

Oct 04 09:33 PM

[jackooo:]

Well spoken Tommiegun.

Oct 05 11:53 AM