Yesterday, ousted Merrill CEO John Thain fired a missile into the Bank of America (BAC) boardroom:
I won’t stand by and have your propaganda machine blame your own stupidity on me, Thain basically said. You knew about our trading losses. You were involved in our bonus decisions. You were the ones dumb enough to fork over $50 billion for a firm worth nothing. So enough with trying to save your sorry asses by claiming to be shocked, shocked now that everyone else is…
(OK, we’re reading between the lines).
Thain’s bombshell has already prompted a hasty retreat by Bank of America, which now looks even more incompetent:
NYT: In the memo, Mr. Thain appeared to challenge Bank of America’s suggestion that Merrill alone was responsible for the earlier-than-usual bonuses. He said the timing, composition and size of the bonuses were all “determined together with Bank of America.”
In the interview, he said that Bank of America even mandated that more of the bonus be paid out in cash rather than stock.
Bank of America has countered with its version of the bonus affair, telling The Financial Times: “We never said we didn’t talk with them about it. But, in the end, it was their decision and they informed us of it.”
That may be the wimpiest corporate statement we’ve ever heard.
But just for the sake of argument, let’s take this statement at face value. Let’s forget for a moment that Merrill’s CFO at the time was a Bank of America guy (BAC’s former chief accounting officer, according to John Thain’s CNBC interview). Let’s say that John Thain just “informed” Bank of America of bonuses and that so outraged Bank of America that Ken Lewis immediately had to fly to New York to fire him. Wouldn’t Ken Lewis have done this at the end of December, when Bank of America was “informed” of these bonuses, instead of at the end of January, when news of the bonuses leaked out?
Meanwhile, what does Bank of America have to say about Thain’s assertion that BAC knew about every trading loss the instant Merrill did–because their guy was sitting in the control room? Does BAC still claimed to be shocked by these losses? Is Bank of America going to continue to complain about John Thain’s plans to go to Davos, even though low-key Bank of America frowned on this? Or is Bank of America finally going to stop talking and actually do something.
Such as fire Ken Lewis.
Ken Lewis’s reputation and shareholder-destroying decisions continue to pile up:
- Buying Countrywide amid a historic market meltdown
- Buying Merrill amid a historic market meltdown…and either doing poor due diligence or betting, wrongly, that the worst was over.
- Claiming to be shocked about Merrill decisions his own team was involved in
- Not insisting on a gag order for Thain, thus exposing the firm to more global public humiliation
In the past 6 months, Bank of America’s stock has fallen from $38 to $6 (-84%). The stock of JP Morgan, meanwhile, has fallen from $50 to $25 (-50%).
Ken Lewis apparently wants to continue to blame the destruction of his shareholders on an act of God, instead of his own bad decisions (as, it appears, do his friends on the board). We doubt shareholders will allow this charade to last much longer.