Yesterday Sallie Krawcheck’s hopes of running Bank of America got a major boost when one of the bank’s largest and most vocal investors, Finger Interest Number One, submitted a filing to the Securities and Exchange Commission urging the Charlotte, NC bank to name an outsider to suceed outgoing CEO Ken Lewis.
And by outsider, they mean Krawcheck. Although Krawcheck is already running Bank of America’s brokerage unit, she is a newcomer to the bank and hasn’t been tainted by investigations into the merger with Merrill Lynch. She was selected for the post by the chief marketing officer of Bank of America, Anne Finucane, who is close to FDIC chair Sheila Bair. So presumably she has the endorsement of regulators, a major consideration for the government-dependent bank. She’s also favoured for diversity reasons: appointing a woman makes a great ‘breaking the glass ceiling’ story.
Charlie Gasparino reports in his column in Forbes that Krawcheck has been pushing for the job so hard that she is even talking like a southerner again. Krawcheck was raised in South Carolina but had long since lost the accent. These days she’s throwing “y’all” into her conversations down in Charlotte. Krawcheck is known for her ambition and drive, so returning to her roots to connect better the the executives at Bank of America wouldn’t be that surprising.
Gasparino, however, thinks appointing Krawcheck would be a big mistake. He says that every analyst he talks to on Wall Street agrees. The problem, he argues, is that Krawcheck flopped at the biggest job she ever held–CFO of Citigroup.
The CFO post at any bank–not just an amazingly complex institution like Citi, which combines brokerage and commercial banking activities, sales and trading with customer deposits and has offices all around the world–is one of the most difficult jobs on the street. But Krawcheck didn’t just have a difficult time adjusting to the rigors of the position; she was, according to people who covered the firm at the time, a disaster. She had almost no grasp of the firm’s balance sheet, particularly the build-up of its holdings of toxic debt, which, as Citi shareholders painfully know, led to the massive losses in 2007 and 2008 that forced the firm to seek billions of dollars in government assistance to prevent it from imploding like Lehman and Bear.
Was Krawcheck primarily responsible for Citi’s much-publicized balance-sheet troubles? Probably not. That distinction goes to the firm’s bond department, which had its own risk manager that allowed the bank’s inventory of risky debt tied to the subprime market to grow to astronomical proportions. But most analysts I speak to believe she deserves at least some of the blame. “The balance sheet was a mess because she allowed risk to be run by the business units,” said one top analyst. “And when you went to her for answers she seemed in way over her head.”
In early 2007, Krawcheck was reassigned by then-Citi CEO Chuck Prince to run a decidedly less intense part of the Citi banking empire–its brokerage business. Krawcheck, by most accounts, was a sound brokerage chief, which is what she’s doing at BofA. But does mastering one job, and flopping at a far more important one, qualify someone for an even bigger position?