Ken Lewis cashes out

As a former employee of Bank of America, I have a few thoughts on the news of CEO Ken Lewis's retirement.

First, when I worked there, Lewis seemed to be a reasonable CEO. He always seemed to do what was best for Bank of America, from fostering internal growth after the Hugh McColl era of heavy acquisitions (including the NationsBank/Bank of America merger), to eventually doing some good acquisitions of his own, including MBNA and Fleet.

But last year was the beginning of the end for Lewis. First there was the head-scratching acquisition of Countrywide. Why acquire a subprime mortgage lender in the middle of the mortgage market's meltdown?

Then there was the Merrill Lynch acquisition. While I don't entirely blame Lewis for that fiasco, he should have been more upfront with investors. If he had doubts, and made them public, it would have put pressure on Ben Bernanke to not take punitive actions against Bank of America. Instead, Lewis became spineless at a time when Bank of America needed strong leadership.

Frankly, I don't have any sympathy for Lewis.

As for Lewis's successor, the Board of Directors is allegedly looking internally for a successor. Of the names mentioned so far, I cannot really speak to them, as I don't have any real experience working for any of them there, nor have I heard anything that would lead me to a reasonable speculation on their chances of success.

However, I would throw one name into the mix: Floyd Robinson, president of Bank of America's consumer real estate and insurance services division. I worked under him when he was involved with marine and recreational vehicle dealer financing. While he was meticulous, arguably to an extreme, he got results. Generally speaking, Robinson was the kind of executive you would bring in when you needed to make an organization more efficient and profitable.

While he might not be popular with the shareholders (he is NOT charismatic), I personally would feel safer as a shareholder if they elevated Robinson to CEO. He would clean up Bank of America and make them leaner and more profitable. That said, I doubt he will get it, although I would buy stock in Bank of America if he did.

Too big to succeed? Part II

On Monday, I asked, "A year after the Lehman Brothers failure, and almost a year after the initial TARP program which was rolled out to save our financial industry by saving those businesses which were "too big to fail", one question remains: What was done to prevent this from happening again in the future?"

Today, Foxbusiness.com answers: Nothing at all.

Consider these figures: At the end of 2007, the four biggest U.S. banks -- Citigroup (C: 4.34, 0, 0%), JPMorganChase (JPM: 44.96, 0, 0%), Bank of America (BAC: 17.63, 0, 0%) and Wells Fargo (WFC: 28.82, 0, 0%) -- held 32% of all deposits housed in FDIC-insured banks. By June 30 of 2009 that had climbed to 39%.

And consider the leverage these banks hold over consumer lending in the U.S. According to government data, between them these four banks now issue about half of all mortgages approved and about two-thirds of all credit cards.

All of this begs the question: If these banks were too big to fail a year ago and they’re even bigger now, how is the U.S. any better off today than it was last September, when the collapse of venerable banking giant Lehman Brothers looked like the beginning of the next Great Depression?

And if you think you can trust our government knows what it is doing by allowing these banks to continue with "business as usual", consider Fox Business's analysis:

The problems with "too big to fail," according to those seeking reform, can be broken down into two parts.

First, it is now painfully clear that any single bank whose failure poses a threat to the broader U.S. economy has grown too big for its own good, not to mention that of its clients, as well as the nation.

Second, banks tagged as too big to fail are then free to operate under the assumption that the government will always come to their rescue, a belief that will likely lead to the same risky actions that brought the world’s economy to its knees a year ago.

In other words, there is absolutely NOTHING to encourage these banks to manage their risk. Obama can say that he won't bail them out again, but do you trust a politician to actually take a hard stand based on principle, especially considering he has already supported multiple bailouts? Do you trust Congress not to go screaming for a bailout?

Frankly, this is a MUCH bigger problem than health care in this country. It would take all 30 million uninsured Americans to have catastrophic illnesses tomorrow, to equal the economic devastation of these four banks failing.

President Obama, you are asleep at the wheel. WAKE UP! No matter how much money you get in campaign donations from these banks, if one of them fails, you WILL be held responsible in the next election.