Bank of America's (BAC) board of directors chose consumer banking chief Brian Moynihan to replace Ken Lewis as CEO on Jan. 1. Their pick of an internal candidate on Wednesday followed unsuccessful attempts to hire a star industry executive for the top job at the nation's largest bank. Those negotiations were stymied by restrictions imposed by government pay czar Kenneth Feinberg that would have forced an outsider to take a big pay cut this year.
The move "draws to a close what is probably the executive search from hell," said Tony Plath, a finance professor at the University of North Carolina at Charlotte. "They needed to find someone to end the drama so that the bank can get back to regular business, but at the same time I am surprised by their choice."
Moynihan, 50, joined the Charlotte, N.C.-based bank as part of its 2004 purchase of FleetBoston Financial Corp. Over the past year he has served as BofA general counsel, head of global wealth management and consumer bank chief.
"I am honored to have the opportunity to lead this important company," Moynihan said in a statement. "We have everything we need at Bank of America to be the best financial services company in the world. What we need to do now is very simple. We need to execute."
The new CEO faces many daunting tasks. He must juggle regulatory investigations into the bank's 2008 acquisition of Merrill Lynch while trying to repair relationship with regulators and members of Congress who sharply criticized Lewis after the bank required $45 billion of federal bailout loans to prevent its failure.
"Brian's wide range of experience, his relationships inside and outside of the company, and his demonstrated ability to understand business dynamics and effect constructive change made him the best person for the position," said Dr. Walter E. Massey, chairman of Bank of America, who led the CEO search.
Moynihan also will join the bank's board of directors.
Lewis, 62, announced his departure in September in a move that surprised Bank of America's board and left it scrambling for a replacement with no clear succession plan in place. Before then, Lewis had promised he would remain as CEO until the bank cleared up its financial problems.
One thing Moynihan doesn't have to worry about is repaying the government loans. The bank received $25 billion from the government's Troubled Asset Relief Program, or TARP, as part of the initial round of investments into hundreds of financial institutions when the credit crisis peaked last fall. It then received an additional $20 billion shortly after it acquired Merrill Lynch in what was a heavily scrutinized deal.
Bank of America repaid the money it received from TARP on Dec. 8. That freed the bank from the government restrictions that had hampered its search for a new CEO, including executive pay limitations. However, its negotiations with outside candidates continued to falter.
Bank of New York Mellon Corp.'s CEO Robert Kelly told employees Monday that he wasn't going anywhere, leaving BofA with one less candidate for its top job. Media reports had listed Kelly among the top choices to lead the bank.
Other candidates reportedly had included: Bob Diamond, president of British bank Barclays PLC; Larry Fink, CEO of asset manager BlackRock Inc.; and New Jersey Gov. Jon Corzine, a former Goldman Sachs chairman and CEO.
Massey said Wednesday that while the bank did consider external candidates, the board decided that Moynihan's experience was as good or better, "and he offered the advantage of a smooth transition."
By picking someone from within, "you express an ability to create a culture that can produce leaders and that's very important," said Keith Springer, president of Sacramento, Calif.-based Capital Financial Advisory Services, which owns financial stocks.
"It's important for these companies to show they have longevity," he said. "And if you can't breed leaders, then you can't survive."
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Bank of America Names Insider Brian Moynihan as New CEO