B
ack in 2007, the state of North Carolina had a proud financial services industry led by two Kens. Ken Thompson of Wachovia, and Ken Lewis of Bank of America. Less than two years later the state is in a depression, one of the companies is gone, and both Kens left their banks in disgrace.
Lewis lasted much longer than Thompson, and his company still exists. In fact, Bank of America has grown by leaps and bounds thanks to the acquisitions of Merrill Lynch and Countrywide. However growth isn’t always a good thing. A growth in the size of my waist isn’t the same as a growth in the size of my biceps (just ask The Sheconomist). Many would argue that Ken Lewis was bullied into purchasing Merrill Lynch, and that it wasn’t a really good fit. Secret meetings went on by then Secretary Hank Paulson, Ben Bernanke, and Ken Lewis of Merrill. Ken was allegedly put in to a “damned if I do, damned if I don’t” situation. The claim is that if Lewis didn’t buy Merrill, they’d just get him fired and put someone in at Bank of America who will buy Merrill. Who knows if this really happened, but I wouldn’t be surprised.
Now the two Kens had similar purchases of loan providers. Wachovia purchased Golden West and Bank of America got Countrywide. There was only a small difference. Wachovia bought Golden West in 2006, right at the worst possible time. Bank of America got a bargain on Countrywide after its stock tanked as a result of all the awful loans they sold. Remember, if a loan is only worth 30 cents on the dollar, if you can buy it for 20 cents on the dollar you’re still getting a good deal. Wachovia basically paid 100 cents on the dollar for stuff that was worth the same 30 cents.
Lewis is lucky however. He wasn’t fired. No rumors seem to be flying that to board demanded that he step down either. He leaves with his dignity intact and will allow history to decide whether that dignity is deserved. Most publicly ousted CEOs have to leave in disgrace and might get lucky if history proves they made the right decisions. At the ripe age of 62, Lewis has a lot left in him. Sure he’s loaded, but I doubt he’s done working. It won’t be long until you find him working for some small financial company, lobbying Congress, sitting on the board of other companies, or just running a non-profit. Even the most disgraced CEOs leave their jobs in better shape than you or me so don’t go hurting for this man.
The story of Ken Lewis will end in December, at the end of 2009. Perhaps, as Bear Stearns marked the beginning of the end for Wall Street, Ken Lewis will mark the end of the end, and we can start 2010 with a new beginning.
What say you regarding Wall Street CEOs? Are they vital to the events that have occurred or has their role in all this been overplayed? Should Ken be remembered for creating the largest retail bank in history, or being a government pawn in back-office decisions that screwed shareholders?
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
