Wednesday, May 6, 2009

Memo to the Obama Administration: Has Bank of America CEO Ken Lewis Stressed You Out Enough Already? There’s an Easy, and Long Overdue, Solution.

Stress test results are about to be released. The Wall Street Journal is reporting that as many as ten banks will fail the test, and will need to raise more capital. One of these banks is Bank of America, and this morning's reports indicate that BAC will need an incredible $35 billion to shape up. CEO Ken Lewis has been saying for more than two months that the firm he leads will not need any more government money. Oops.

If today's reports are correct, Ken Lewis will have been wrong, very wrong, once again. While shareholders couldn’t muster the votes needed to push Ken to Pebble Beach full-time, what are we to make of a CEO who has a remarkable record of being wrong? It’s actually worse than that. Ken seems to think that he is absolutely right (to buy Countrywide, to buy Merrill Lynch, to fire John Thain) when in fact he is terribly wrong. And now yet another insult to shareholders. Bank of America is still in trouble, BAC is failing the Fed’s stress test, BAC is unlikely to soon pay back the money it has already received from the government, and BAC will need more capital to weather the financial storm. Capital that almost certainly will need to come from the government, again, whether in the form of a preferred-to-common stock swap, or new money entirely.

The big question is whether the Treasury will insist that Ken Lewis must go if the bank is to move forward. There can be no fathomable reason to keep him in the top job at this point. Even Vikram Pandit at Citi has done a better job than Ken Lewis. Or at least it wasn’t Pandit that put Citi into the mess it’s in. But it was Ken that put BAC into the mess that it is in. If Rick Wagoner had to walk the plank, how in the world can the Feds keep Ken Lewis in the corner office? It’s time.


  1. Bravo.

    This shouldn't be a tough decision. There is more than enough evidence that it's time, as Sydney writes.

    If it feels "tough" or "hard" to anyone, maybe it's because it hasn't been done as often as it still needs to be done: let go of executives who aren't performing at the level required, those who have been given several chances to perform.

  2. Just curious why firing Thain was a bad move if ML was in such bad shape? Wouldn't Thain be responsible for that?

  3. Some call them the mafia---customers who get treated bad---

    Can you say trouble?

  4. Honestly, I am not surprised that Bank of America is in a group of risk. This bank is one of the banks that it used to say are "too big to fail" but I do not think that it's really strong and trustworthy like it was before. Most of the banks are stressed now because the competition is rising, there are lots of alternatives to the banking services now and consumer can enjoy better terms and conditions applying to private lenders or online loan lenders.