Wednesday night, I suggested it was Time to Fire Ken Lewis of Bank of America. Since then, several other people have come out to echo those sentiments:
David Reilly, Bloomberg notes that the bad bet on Merrill follows a bad bet on China Construction Bank and an even worse bet on Countrywide:
Kenneth Lewis gambled big. He lost. Now taxpayers have to pick up his tab. For that, the Bank of America Corp. chief executive officer probably needs to go. At the very least, Lewis, who also is chairman, should give up one of his posts to bring greater accountability to the bank.
Not because one specific bet, Merrill Lynch & Co., is souring. Lewis could be forgiven if that were his only misstep.
It’s not. Since the crisis began, Lewis has misjudged the depth, breadth and severity of the storm that has crushed the global financial system. In doing so, he used capital that he should have been husbanding.
The WSJ’s Heidi N. Moore writes:
Making your bed, and then lying in it, is a quaint notion in the world of financial services in 2008.
Bank of America CEO Ken Lewis’s depiction today of his Merrill Lynch acquisition as a quasi-government rescue is, to be sure, a remarkable about-face. Lewis has made no secret of his desire to own a major investment bank, and he bragged of how Merrill Lynch fit the bill because of its extensive network of 17,000 brokers serving average investors. Lewis made a point of paying $29 a share for Merrill Lynch — a generous premium when he could have acquired it much less expensively as securities firms lost value — and he boasted that Bank of America required no “capital relief” from the government. Lewis’s decision to beat his chest about his own prowess by paying a high price and rejecting government help was a savvy move at the time — as Lehman was failing, the markets were rewarding companies that appeared strong. Rejecting government funds showed Bank of America was strong. The world has [since] changed.
Henry Blodget is even blunter:
As taxpayers are forced to digest the latest Wall Street-Treasury outrage–a secret bailout of Bank of America to the tune of $15 billion of capital and $120 billion of trash-asset guarantees–it’s clear that, this time, someone has to be held responsible. And that someone is Bank of America CEO Ken Lewis.
Unlike Vikram Pandit at Shitigroup and John Thain at Merrill, Lewis can’t blame the need for this bailout on his predecessor’s idiotic bets. Bank of America needs another bailout solely because of an idiotic Ken Lewis bet: His decision three months ago to buy Merrill Lynch.
No one put a gun to Ken’s head and said “You’ve got to buy Merrill.” There wasn’t some secret backroom Treasury deal where Hank Paulson forced him to take one for the team.
On the contrary, Ken Lewis bought Merrill because he had always wanted to own it and because he thought he was getting a good deal. Furthermore, he knew exactly what he was getting: A firm that, for four straight quarters had been forced to write down tens of billions of losses on idiotic bets and still had about $1 trillion of those bets on its balance sheet.
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Previously:
Time to Fire Ken Lewis of Bank of America (January 14, 2009)
http://www.ritholtz.com/blog/2009/01/time-to-fire-ken-lewis-of-bank-of-america/
Sources:
Bank of America’s Lewis Has to Pay for Blunders
David Reilly
Bloomberg, Jan. 16 2009
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_reilly&sid=ag..fL1BCuXo
The Street Smarts of Bank of America’s Ken Lewis
Heidi N. Moore
WSJ Deal Journal, January 16, 2009, 2:03 pm
http://blogs.wsj.com/deals/2009/01/16/counterpoint-what-else-could-ken-lewis-have-done/
Ken Lewis Should Be Fired
Henry Blodget
Fortune, JANUARY 15, 2009: 09:04
http://money.cnn.com/news/newsfeeds/siliconalley/search/2009_1_ken_lewis_should_be_fired_bac.html
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