Lewis, Outsider Who Sought To Conquer Wall Street, Falls
September 30 2009 - 7:20PM
Dow Jones News
This was supposed to be the year that Ken Lewis, the outsider
who rose to the pinnacle of American banking, finally conquered
Wall Street. He will resign instead.
The Bank of America Corp. (BAC) chief executive did complete the
empire that his predecessor as CEO, Hugh McColl Jr., started to
build with the merger of BankAmerica and NationsBank. But Lewis's
completion of that empire came at a high cost to shareholders, and
ultimately to himself.
When Lewis, 62 years old, resigns at the end of the year, he
will end a remarkable career in banking tarnished by questions from
regulators and Wall Street about his handling of the last building
block to the Bank of America he envisioned: The acquisition of
Merrill Lynch & Co.
Lewis was born in Mississippi and raised by a single mother with
modest means, a fact that he often said formed his life and his
career. He won the American Banker's "Banker of the Year" award
twice, including last year. At the ceremony, he said: "This is not
a time for celebration in our industry."
Humility was unusual for Lewis, who was accustomed to making
bets, and to winning. In 2004, he boldly bought FleetBoston
Financial at a price that shocked investors - Bank of America's
stock price sank. But by most accounts, the deal paid off. He was
confident that Bank of America could repeat the strategy with the
acquisition of credit card lender MBNA Corp., and troubled mortgage
lender Countrywide Financial last year just before Wall Street fell
into a shocking tumble. He had also acquired U.S. Trust Co., an
upscale bank, and LaSalle Bank in Chicago - building a massive
consumer lender.
It seemed Lewis envisioned Bank of America as a bank, not a
titan of Wall Street. In 2007, after reporting losses in BofA's
modest investment-banking division, he told investors: "I've had
all the fun I can stand" in investment banking.
But it was Merrill Lynch that turned out to be his biggest bet.
In a deal drawn up over a dramatic weekend that ended in the
collapse of Lehman Brothers, Lewis once again made a bold move: He
paid a hefty $29 per share for Merrill, which was also believed to
be close to suffocation.
Finally, Bank of America was truly a universal bank, and viewed
itself as peer to Wall Street powerhouse JPMorgan Chase & Co.
(JPM). Shortly thereafterwards, however, Bank of America appeared
more like Citigroup Inc. (C): a bank struggling with massive losses
that illustrates the kind of credit risk that management
underestimated.
Such suggestions angered Lewis, who defended his acquisition of
Merrill Lynch. He argued that Merrill's sheer earnings power will
vindicate him, just as the earnings power of Fleet confirmed Lewis'
vision of building a massive retail bank. JPMorgan Chase and Wells
Fargo & Co (WFC) have since caught up with BofA in deposits and
branches.
Lewis became CEO in 2001, succeeding the legendary McColl; he
had joined Bank of America in 1969. This April, shareholders
demanded the bank strip him of the chairman title, and the board
complied. Bank of America announced his resignation without naming
a successor.
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com