The federal government is putting pressure on Bank of America (BAC) to revamp its board. The issue of how much authorities will try to influence management of financial firms that have TARP money has come up more than once.
The Treasury and Federal Reserve have said they have no interest in running the private banks, but their actions have shown that this may not be entirely true.According to The Wall Street Journal,"Federal officials have pressured Bank of America Corp. to revamp its board by bringing in directors with more banking experience."
Does it really matter who sits on the B of A board? Clearly the people have to have enough business experience to allow the entire board to be a good governance body. But the government appears to be involved in the bank's strategic direction and perhaps its major decisions. Henry Paulson pressured the bank to close the Merrill Lynch deal. The results of the "stress tests" will force B of A to bring in $34 billion in new capital.
It is probable that representatives from the Federal Reserve and Treasury have some contact with B of A management and members of the board on a very regular basis. Under those circumstances replacing members is merely a charade.
Douglas A. McIntyre is an editor at 24/7 Wall St.