*UPDATE: We wrote this a week ago, before we learned that Ken Lewis had approved the payment of $15 billion of Merrill Lynch bonuses while seeking a $20 billion government bailout. We now say again, with even more conviction: Ken Lewis should be fired.
EARLIER: As taxpayers are forced to digest the latest Wall Street-Treasury outrage–a secret bailout of Bank of America to the tune of $20 billion of capital and $100+ billion of trash-asset guarantees–it’s clear that, this time, someone has to be held responsible. And that someone is Bank of America CEO Ken Lewis.
Unlike Vikram Pandit at Shitigroup and John Thain at Merrill, Lewis can’t blame the need for this bailout on his predecessor’s idiotic bets. Bank of America needs another bailout solely because of an idiotic Ken Lewis bet: His decision three months ago to buy Merrill Lynch.
No one put a gun to Ken’s head and said “You’ve got to buy Merrill.” There wasn’t some secret backroom Treasury deal where Hank Paulson forced him to take one for the team.
On the contrary, Ken Lewis bought Merrill because he had always wanted to own it and because he thought he was getting a good deal. Furthermore, he knew exactly what he was getting: A firm that, for four straight quarters had been forced to write down tens of billions of losses on idiotic bets and still had about $1 trillion of those bets on its balance sheet.
Let’s walk through the possibilities:
- If it didn’t occur to Ken Lewis that Merrill might be forced to take additional “monstrous” writedowns (as he now reportedly describes them), he should be fired.
- If it did occur to him and he didn’t check this out during the due diligence process, he should be fired.
- If he didn’t think the global debt markets could continue to deteriorate to a level that required such writedowns, he should be fired.
- If he fully expected the writedowns and just didn’t realise what they would do to Bank of America’s own stock price, he should be fired.
In fact, there is no scenario we can think of short of deliberate fraud by Merrill Lynch in which Ken Lewis should not be fired. His disastrous acquisition decisions–first on Countrywide and now on Merrill Lynch–have brought Bank of America to the brink of collapse. He has destroyed the firm’s shareholders, and, once again, forced U.S. taxpayers to bail him and his demolished firm out.
If Ken Lewis doesn’t do the right thing–accept responsibility for this disaster and resign on tomorrow’s earnings call–he should be fired. Bank of America shareholders and US taxpayers deserve no less.