With Bank of America (BAC) shareholders staring at massive losses as the company battles for its survival, they must be asking themselves: How the heck did we get into this mess?
The short answer, of course, is Ken Lewis, the CEO who embarked on the two acquisitions that have brought the company to its knees: Merrill Lynch and Countrywide Financial.
But not so long ago, Ken Lewis was on top of the world. In November, he was named the American Bankers Association's Banker of the Year, praised for having navigated his company through the bubble years without succumbing to the toxic crap that brought so many of its peers down.
Of course, Lewis' next move was to go ahead and buy the crap that had brought his peers down and, in the process, bring down his own company.
Today his selection as Banker of the Year seems ironic and funny in a sick sort of way, but I wonder: Was Lewis' great reputation for leading Bank of America and building it into a powerhouse a big part of the company's demise? I think it may very well have been, for two reasons:
- Ken Lewis was on a roll. This may have led to a feeling of invincibility and an excessive level of self-confidence that allowed him to take huge risks that a less successful man might not have taken.
- Lewis' great track record inspired tremendous confidence in him. The company's board of directors and other senior officers may have been less likely to question his judgment or independently verify his ideas about risk. But who could blame them? Trusting Ken Lewis had brought nothing but wealth in the past.
When you look at the biggest corporate failures of the current mess -- AIG, Bear Stearns, Lehman Brothers and Countrywide Financial -- they were all run by highly respected CEOs who had long track records of brilliance.
Shareholders might have been much better off with a less-respected journeyman CEO whose actions they would have been willing to analyze with greater skepticism.