Bank of America CEO resignation example of “No good deed goes unpunished” axiom
“When Bank of America bought Merrill Lynch last winter, the political class applauded and called CEO Ken Lewis a solid citizen. Now, from the safety of noncrisis hindsight, our politicians claim the bank’s shareholders may have been mistreated. Few of those shareholders are complaining, given the profits Merrill has been generating for the bank in recent months, but the pols apparently want a scapegoat for bailouts and bonuses. Mr. Lewis fits the bill.”
It is a testament that it took All The Powers That Be so long to run this good man off. He has been under siege for most of 2009 from the the whole of the Democratic Party Congress; many spineless Republicans in Congress; Democrat Governors and Attorney Generals in New York; and the whole of the Drive-By media, including the hometown paper of BOA in The Charlotte Observer.
Banks and greedy CEOs did not cause The Great Recession. Many factors led to the financial crisis that socked America and the World last Fall and the only scapegoats worthy of the appellation occupied elective office as Democrats and bureacratic positions that regulated Banks in the late 90s. They threatened CEOs like Ken Lewis with stiff fines if they refused to make home loans to low income applicants that couldn’t afford homes while also assuring them that Fannie Mae and Freddie Mac would buy those bad loans and remove the risk.
If anyone should resign it is Barney Frank (D-MA), Chris Dodd (D-CT) and The President of the United States (D-Chicago).
Ken Lewis is not a greedy CEO. Ken Lewis is an honorable man that kept his bank solvent throughout the crisis and took the toxic Merrill Lynch and turned it into a profit generator; all while under extreme pressure from Treasury Secretary Paulson and Fed Chairman Bernanke to keep Merrill to save the nation.
Ken Lewis’ leadership of BOA is nothing short of a miracle and he is one of the true heroes in preventing a much worse, 1929 like crisis.
God bless you Mr. Lewis and Godspeed, and with respect to the NY Attorney General’s and others’ obcession with the puny Merrill bonuses, the WSJ says it best:
If Mr. Cuomo wants to do a public service, he could focus on the government’s own role in this episode. In late December then-Treasury Secretary Hank Paulson threatened that Mr. Lewis and the board would be fired if they didn’t complete the Merrill deal. Mr. Lewis was considering invoking his rights under a material adverse condition (MAC) clause to kill the merger.
Mr. Paulson has argued that his intervention helped everyone, including BofA shareholders, because in fact the MAC clause would not have allowed Mr. Lewis to get out of the deal. A more likely scenario is that Mr. Lewis would have used Merrill’s exploding losses and the threat underlying the MAC to get Merrill CEO John Thain to lower his price.
Under oath, Mr. Lewis told the New York AG’s office that he would have tried to renegotiate for a better price—if Mr. Paulson hadn’t told him not to. When asked several times if this were true at a July Congressional hearing, Mr. Paulson refused to give a straight answer. After one such response, an exasperated Mr. Towns observed, “I’m still trying to find out whether that was a yes or no.”
Here’s a theory of this case that won’t help Mr. Cuomo become governor, and won’t help Mr. Towns make headlines, but might even be true and fair: Amid the autumn and winter financial panic, everyone involved was operating under enormous pressure with incomplete information. Federal officials all but ordered Mr. Lewis to buy Merrill and they certainly knew all about the bonuses.
Maybe this is a case in which instead of looking for a villain to punish, our political class should thank Mr. Lewis and BofA for coming to their rescue when they really needed it.
“One man with courage makes a majority.” – Andrew Jackson