Bank of America Chief Lewis Resigns

123jump.com Staff
30 Sep, 2009
New York City

Bank of America chief executive Kenneth D. Lewis offered his resignation to the board. The board has still not selected a successor. Bank of America has received three government bailout totaling $45 billion and $118 billion of asset guarantees.

[R]8:20 PM Bank of America chief executive Kenneth D. Lewis offered his resignation to the board. The board has still not selected a successor. Bank of America has received three government bailout totaling $45 billion and $118 billion of asset guarantees.[/R]

Kenneth D. Lewis, chief executive officer and president of Bank of America Corp announced his intention to resign effective December 31, 2009.

The decision appears to have been forced after a botched purchase of Merrill Lynch that continues to attract attention of several lawmakers and regulatory agencies.

Merrill Lynch acquisition pitted Lewis with Fed Chairman Bernanke and the former Treasury Secretary Henry Paulson and other committees of various lawmakers and Securities and Exchange Commission.

Lewis has made headlines in the last eight months as regulators questioned him about the Merrill Lynch deal, Countrywide operating practices and SEC and New York Attorney General demand more explanations regarding bonus practices at Merrill Lynch.

Lewis joined North Carolina National Bank, the predecessor to Nations Bank and Bank of American in 1969 as a credit analyst and rose steadily to lead the bank in 2001.

Under Lewis’s leadership bank made more than $140 billion of acquisitions and positioned the bank as one of the largest banks in the nation. It was well known in the banking industry that Lewis never met an acquisition he did not like.

It was his penchant for these non-stop acquisitions that finally ended his career.

The bank had avoided the current housing market meltdown until its expensive and ill-timed acquisition of Countrywide Financial. The subprime lender brought the bank at the center of the housing market bubble and drew a sharp focus from the state and national regulators and lawmakers.

The bank acquired its initial stake in Countrywide in August 2007 and purchased the troubled lender in January 2008.

Lewis acquired Merrill Lynch for $33 billion that expanded the bank into brokerage and in the business of risk taking at the height of financial crisis that had ended the 95-year old brokerage firm’s independence.

Before the purchase of Merrill Lynch and Countrywide, Lewis engineered one of the longest merger sprees in the banking industry.

The spree included purchase of several notable and leading banks that totaled nearly $100 billion in four years ending in 2008 including the purchase of $48 billion of Fleet Boston Financial in 2004, purchase of MBNA in 2006 for $34.2 billion, U.S. Trust from Charles Schwab for $3.3 billion, and LaSalle Bank in Chicago for $21 billion.

It was the handling of the Merrill Lynch deal that made headlines for months and drew the ire of several top law makers. After Lewis realized that Merrill Lynch had more problems on its balance sheet than were first evident in the late 2008, he tried to unwind the deal.

Former Treasury Secretary Paulson known for his hard charging ways and unyielding attitude essentially threw book at Lewis. He “threatened” that the government will seek resignation of Lewis, top management and the board if Bank of America backed out of the deal. The details of discussions between Lewis, Paulson and Bernanke are disputed by either party but one thing was clear.

The government and Fed wanted Bank of America to continue with the Merrill merger and were willing to finance the deal but will not put that in writing. Lewis put his trust with two top regulators and but could not control the fallout after Merrill bonuses were paid out.

Lewis was fighting for his job and yielded to the demands of Paulson and Bernanke and that did not sit well with other lawmakers.

However, to this date, Lewis believes that these acquisitions are working and adding value to Bank of America.

""The Merrill Lynch and Countrywide integrations are on track and returning value already,"" Lewis noted in the press release that announced his resignation.

Shareholders grew restive as investigations deepened and prolonged, merger overreach made headlines in the media and losses at Merrill Lynch escalated. Shareholders pressed for his removal from chairman of the board at the annual general meeting in April that passed with a narrow margin and was replaced by Walter Massey.

After Lewis’s resignation, the offices of Attorney Generals of Ohio and New York issued statements indicating that their investigations will continue.

Only this month the friction between the lawmakers and Bank of America executives was out in open after the bank refused to turnover thousands of internal documents to a U.S. House Committee chaired by Representative Edolphus Towns of New York.

The multiple investigations hanged over Ken Lewis and appear to have severely distracted him from integrating two large merges in less than two years that cost $37 billion. However one will not read that from the resignation announcement.

In a message today to Bank of America associates, Lewis thanked them for the opportunity to lead. ""In 1969,"" Lewis wrote, ""I chose to come here because of the culture and the people. We believed that with trust and teamwork, anything is possible. We remain that company today.""

Bank of America needed three government bailout that totaled $45 billion and the government guarantees of $118 billion.