Abigail with attitude: Calamity Ken’s legacy grows at Bank of America
Ken Lewis, the former chief executive and chairman of Bank of America, was an autocratic bank chief and never bothered to put a proper succession plan in place. Lewis’ legacy is a murky mess.
He made some terrible decisions as he defiantly ploughed on, trying to attain his dream of building the largest American financial-services group. Now, some of the timber is cracking. In June, Bank of America announced a series of write-downs associated with the acquisition of mortgage lender Countrywide.
The bank announced a settlement with 22 investors in Countrywide mortgage bonds of $8.5 billion and said it would record another $5.5 billion of charges to cover additional claims from government-owned mortgage companies as well as other private investors. Bank of America also said it expects to record an additional $6.4 billion in other mortgage-related claims in the second quarter of 2011.
According to the Financial Times, the purchase of Countrywide has led to more than $25 billion in losses for long-suffering Bank of America shareholders. For more on this topic of lawsuits against banks, read an article in the June edition of Euromoney: ‘Litigation could seriously damage banks’ health’.
I am outraged. I always had my doubts about Bank of America under King Ken – or should that be King Kong given that his business judgement has turned out to be spectacularly flawed? “When the losses are finally counted,” a source says, “will the bank have lost more on the acquisition of Countrywide or Merrill Lynch? It could be a close call.”
In my July 2008 column, I expressed my misgivings about Ken’s property portfolio. Lewis initially invested $2 billion in Countrywide in August 2007 and then, when the shares halved in January 2008, he decided to double–down and buy the whole company.
On a conference call in January 2008 announcing the acquisition of Countrywide, Lewis stated: “There are near-term challenges, but where there are challenges, there are opportunities. We view this as a one-time opportunity.” At the time, such words sounded vaguely statesmanlike. In retrospect, they seem stupid. But then history can make a clown of us all.
The Abigail with attitude column would like to know whether any member of Bank of America’s board opposed this acquisition. I suspect they all went along with it and, if so, shouldn’t they and Ken be forced to regurgitate the fat stipends they took home in 2007?
After all, when the Countrywide acquisition was announced, Bank of America shares closed at $38.50. Today, three and a half years later, they are trading around $10.50. And please don’t get me started on the millions of dollars paid to Angelo Mozilo, the chief executive of Countrywide, who so cleverly passed the buck to Ken.