Don't Let the Door Hit You, Ken Lewis!

The day is rapidly approaching when Bank of America (NYSE: BAC  ) will be done with the Ken Lewis era. Yesterday, Lewis announced that he will retire as both CEO and director of the bank as of the end of this year.

Why am I excited about the departure of B of A's head honcho? As a shareholder, I've watched Lewis chase growth and try to please Wall Street analysts by playing fast and loose with what was once a solid, conservative bank. The result was that mismanaged risk left the bank standing short-less along with the likes of Citigroup (NYSE: C  ) when the proverbial tide went out.

In expected fashion, B of A's press release on the departure quotes Lewis as more or less pronouncing the bank healthy and ready to take on the world, while giving himself a nice pat on the back for "the decisions and initiatives of the difficult past year-and-a-half." Ostensibly the healthy path that Bank of America is now on is the reason Lewis feels ready to retire, though anybody who actually follows the bank should be able to figure out that the drubbing that he's taken from the government over the Merrill Lynch acquisition is the more likely reason for the move.

Parting isn't always sweet sorrow
Back in April, I laid out my case for giving Lewis the boot. I don't know that there's a better way to sum up the Lewis era than to say that the best thing he did was make the company big enough that the government had to save it during these tough times. He made quite a number of large acquisitions while he was at the top, many of which appeared to be either ill-timed, overpriced, or both.

At the same time, Lewis eschewed the conservative approach of other large banks like Wells Fargo (NYSE: WFC  ) and US Bancorp (NYSE: USB  ) and tried bolstering the bank's investment banking operations, perhaps hoping to capture a little of the magic that makes Goldman Sachs (NYSE: GS  ) and Morgan Stanley (NYSE: MS  ) so great. Of course, you don't become Goldman overnight, and big commitments with bad timing and risk management led to massive losses from B of A's IB unit.

Ironically, Merrill Lynch was one of the financial institutions that seemed to strive the most -- and failed the worst -- to be more like Goldman. Today, Merrill is (controversially) part of Bank of America.

The more things change ...
For investors and current B of A shareholders, though, the big question may be how much the bank really changes after Lewis is gone. In the press release, Lewis noted that there are "a number of senior executives" who will compete to inherit the headaches that he's leaving behind.

Many of the bank's current top execs are longtime Bank of Americans -- some have been with the bank for 30 years or more. The only real fresh blood -- that didn't come by way of Merrill Lynch -- is Sallie Krawcheck, who, as I noted back in August, would hardly excite me as a replacement for Lewis.

Don't get me wrong, some of the execs who have been with B of A for decades-plus may have very different ideas than Lewis and could be great choices for CEO. However, it'd be great to see the board look outside of Charlotte, N.C., headquarters and maybe bring in a fresh perspective.

So do we buy now or what?
It appears that I may not be the only one toasting Lewis' departure, as B of A's stock was up a bit in yesterday's aftermarket after falling in regular trading. However, I can't really say that my opinion has changed much since I expressed my lack of excitement for shares back in June.

New leadership may be a step in the right direction, but it'll be nice to know who will be the new chief and what the new direction might look like before allowing B of A to hang out with the cool kids like Wells Fargo and JPMorgan Chase (NYSE: JPM  ) .

In the meantime, I can't help but note that in the press release, Lewis specifically said that senior executives would "compete" for the CEO role. I can only hope that the board will decide to make it interesting and have C-suite potato sack races, home run derbies, or bake-offs. Now that would get me excited.

The Federal Reserve may have been crucial in saving Bank of America and others, but now someone may need to save the Fed. Ron Paul is on the hunt and Fool Jennifer Schonberger recently pinned him down for an interview

Fool contributor Matt Koppenheffer owns shares of Bank of America, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy thinks it could probably beat any of the B of A execs in a potato sack race or home run derby. Its baking skills are lacking, though.


Read/Post Comments (12) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 01, 2009, at 12:35 PM, TDRH wrote:

    CFC and ML could have been purchased for pennies on the dollar if they have been conservative and patient.

  • Report this Comment On October 01, 2009, at 5:01 PM, swiver wrote:

    Quite mild. They used to put peope in iron coffins with spikes on the inside, (to quote a line from Monty Python).l

  • Report this Comment On October 01, 2009, at 5:42 PM, 7footmoose wrote:

    as a very long term BofA shareholder i am certainly not happy with the stock's performance, i disagree with this piece on so many levels i'm not sure where to start, let's start with the easy issues, they did pay more than necessary for both Countrywide and ML, i'll wait for the facts to come out, if the government will let them, before i solely condemn Lewis for this action, Paulson and Bernanke might be complicit in that decision, as for the perpetual adoration of Wells Fargo, i suggest that we wait until they have fully digested all of the Golden West/Wachovia toxic waste, there may well be a very bad gastrointestinal reaction before that is completed, they much like BofA might have bit off more than they can chew, as for the timing of the acquisition and prices paid its not like the Fool has not ardently pushed stocks which later proved to be dogged around the edges themselves, you are very good at hindsight however, keep up the lackluster work

  • Report this Comment On October 01, 2009, at 5:46 PM, McJazz wrote:

    In the words of the late Groucho Marx, "He ought to be horse-whipped, and if I had a horse....."

  • Report this Comment On October 01, 2009, at 6:04 PM, TMFKopp wrote:

    @ 7footmoose

    As for the acquisitions, there's more to the story than just Countrywide and ML. If you go back to my prior piece on Lewis (http://www.fool.com/investing/general/2009/04/29/b-of-a-need... you'll see that I made a case for why many of the acquisitions that he made were ill-conceived.

    "its not like the Fool has not ardently pushed stocks which later proved to be dogged around the edges themselves, you are very good at hindsight however"

    I guess I'm not following your logic here as far as this pertains to Ken Lewis' term as the CEO of B of A. Since this article is a look at Lewis' term as chief, it would follow that hindsight is pretty much the point.

    As a long term shareholder of B of A myself, I've simply been very disappointed in the way he has run the bank and would like to see some fresh ideas in the C-suite.

    Matt

  • Report this Comment On October 01, 2009, at 6:33 PM, BOAFAN wrote:

    ken Lewis may well be remembered as the man who destroyed Bank of America. His reckless spending spree on acquisitions seems, in retrospect, to have been an ego driven attempt to be the biggest, no matter what the cost. He should not be allowed to retire without first accounting for his sins. The Board of Directors is complicit and should also be held accountable. Can the various fines the SEC is posied to levy against Bank of America for securities violations be taken out of Ken Lewis's retirement checks?

  • Report this Comment On October 01, 2009, at 7:44 PM, 7footmoose wrote:

    well Matt if you are going to dwell on hindsight I'd suggest you reach back the full forty years Lewis worked at the bank and the first thirty plus years he stood at the side of one Hugh McColl learning his trade while the little NC bank grew to be what it is today, it's not like BofA is the only financial institution to get caught up in the slime, you have failed to yet grasp the real issue with Lewis, "if" he found out that the ML deal was in fact the asset wasteland that could have potentially destroyed BofA then he should have invoked the MAC clause, if then as it has been reported, Paulson and Bernanke threatened to oust him and the Board he should have publicly resigned as should have the entire Board stating as their reason the governments threats over their unwillingness to comsumate the ML deal, Mr Lewis should be condemned if in fact he is condemnable for not "doing the right thing" for his employer, the shareholders, instead you and others are second guessing the price and timing of acquisitions some of which could still prove to be tremendously profitable for the bank, missing the real point even in hindsight

  • Report this Comment On October 01, 2009, at 7:49 PM, drilldrilldrill wrote:

    I don't care since the government itself didn't rid him.

    I think with or without him the stock will double or triple by year end 2010. This is my favorite stock right now. Bought more today, and laughed thinking of the rush to beat the government deadline for homeowners to get credit from government to get more money again as credit for buying a house. Wow banks keep failing helping this stock and government keeps helping without trying. It is kind of funny but still green money.

    Hard to believe any one bank is allowed to be so BIG.

    Thanks to Ken and our government. LOL all way to bank.

  • Report this Comment On October 02, 2009, at 1:59 PM, TMFKopp wrote:

    @ 7footmoose

    I'd suggest that maybe Lewis missed a lesson over that 40 years about how to run a dependable, conservative bank.

    As for ML, as I noted above, ML may have been the final straw in Lewis' BofA career, but it's hardly been his only mistake.

    Matt

  • Report this Comment On October 04, 2009, at 7:56 PM, fotoguy44 wrote:

    Martt,

    What planet have you been living on: Ken Lewis has been an outstanding CEO of Bank of America, having grown it substantially since he took over.

    The acquisition's he recently made will make BAC a powerhouse and a great investment in the future.

    Why don't you spend more time on the pressure puy on him by thr Fed's.

    Dave Reid

  • Report this Comment On October 07, 2009, at 1:52 PM, TMFKopp wrote:

    @fotoguy44

    Bigger isn't always better -- particularly when it comes via overpriced acquisitions that hurt shareholder value. If BofA becomes a powerhouse in the future, it's not because of savvy dealmaking, it's because those evil Fed's stepped in and provided lots of capital when capital was scarce and set interest rates so low that you'd have to try hard to not make money on spreads.

    Matt

  • Report this Comment On December 06, 2011, at 2:28 PM, dionni wrote:

    Whoa!! What happens next in B of A's worst situation now that Lewis throws it all away? Who's gonna be the next Lewis to take the reign of "crazy horse"? I think Lewis, (on one press release) is decorating and beautifying back the image of B of A paving his path leaving his chair to the next of his

    successors.

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