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Ken Lewis has worked 40 years at Bank of America. He knows how the bank does business. He is well aware of what happens to those who make big mistakes.
In 1998, when NationsBank completed the merger that turned it into Bank of America, David Coulter was positioned to take over once Hugh McColl retired. Then came news Coulter lost a ton of money in hedge funds and Russian bonds. The deal closed at the end of September. By Halloween, Coulter was gone.
When BofA acquired Merrill Lynch, John Thain was positioned to take a spot high on the organizational chart. Then came news that Thain rushed out billions in bonuses and gave his office a Trump-style makeover. The deal closed on New Year's Day. Three weeks later, Thain was gone.
Lewis saw the Coulter deal go down, and cut Thain loose himself. He knows the rules. When somebody is no longer an asset to Bank of America, that person has got to go.
Lately that person's Ken Lewis.
Late Wednesday afternoon, after the market closed, BofA announced that Lewis will retire as CEO at the end of the year. In most of these things, of course, "retire" is sort of like "bless your heart" - there's a lot more to it than face value. I doubt Lewis had a sudden urge to go watch sunsets.
BofA is under investigation by every law-enforcement agency except CSI. The FBI, U.S. Justice Department, Securities and Exchange Commission, and attorney general offices in North Carolina and New York are all looking into the Merrill Lynch deal. The investigations - at least the parts made public - focus on the last-minute bonuses Merrill Lynch handed out before the merger, and whether BofA misled investors about the bonuses.
BofA had agreed to pay a $33 million fine to settle its case with the SEC, but a federal judge threw out the deal and ordered the case to trial. That was a Taser shot all the way to the top of the BofA building. Clearly the judge wants the bank held accountable, and names named. What would happen if the court found that BofA defrauded investors, with Lewis still in charge? The bank would take a gigantic hit. But with Lewis gone, BofA could claim that it was trying to start clean.
Neither option is great for our town. The bank that stabilized Charlotte for so long now feels unstable. BofA grew - and stayed in Charlotte - by being the strongest partner in every merger. All those pieces welded together, and now you have to wonder about the strength of the joints.
Less than three years ago, BofA stock was trading at nearly $55 a share. This past February, the stock dipped under $4. Even now, after seven months of trending upward, it's still less than $17.
It's not fair to blame all BofA's problems on Lewis. But banking is not fair. It's ruthless. And no bank over the last quarter-century has been better at being ruthless than Bank of America.
Ken Lewis, the CEO, had to go. And Ken Lewis, the BofA lifer, knew it.
