It always helps to put a face on one’s adversary in a protest campaign, and whether he likes it or not, Kenneth Lewis’s mug has become the lightning rod for criticism of the ongoing bailout of Big Finance. This post is being written on the eve of the most challenging day in Lewis’s 40 years as a banker. There is a chance that the shareholders of Bank of America, where Lewis has been chairman and chief executive since 2001, will oust him from the board or take away his chairmanship.
Lewis’s scalp is being sought by many. The Service Employees International Union, which has made removal of Lewis the centerpiece of its “Bad for America” campaign against BofA, this week joined forces with Moveon.org to press the issue. Major institutional investors such as the California public pension funds CALPERS and CALSTRS announced they had voted their millions of shares against Lewis. Muckraking filmmaker Robert Greenwald issued a video to further the crusade.
Those calling for Lewis’s ouster have mainly been focusing on his recent misdeeds: his still unclear role in the takeover of failing Merrill Lynch and the fat bonuses received by Merrill employees just before that deal took effect; his decision to jack up interest rates on credit card accounts; and BofA’s role in corporate organizing against the Employee Free Choice Act.
Yet Lewis has a lot more to answer for. In fact, his entire career, which has been spent exclusively at BofA and its predecessor companies, symbolizes what has gone wrong with the U.S. banking system over the past three decades.
When Lewis graduated from Georgia State University in 1969, he went straight to work as a credit analyst for a regional financial institution called North Carolina National Bank (NCNB). He rose through the ranks and eventually came to the attention of Hugh McColl, a brash ex-Marine who took over as chief executive of NCNB in 1983 and set out to transform the bank.
McColl launched an aggressive campaign to become a financial superpower. Taking advantage of the weakening of longstanding restrictions on interstate banking, he engineered a series of takeovers, first in Florida and then among big players in Texas crippled by the 1980s real estate meltdown in the Lone Star State. In 1989 McColl was rebuffed in his attempt to acquire Citizens and Southern, Georgia’s largest bank, which instead merged with Virginia-based Sovran Financial.
Two years later, after C&S/Sovran was hit with a sharp increase in its volume of bad loans, the combined company could not resist a new takeover effort by McColl. The deal turned NCNB into one of the country’s most powerful “superregional” banks, an achievement that McColl celebrated by grandiosely changing his company’s name to NationsBank.
As McColl made his various conquests during the 1980s, it was usually Ken Lewis who was sent in as a viceroy to run the newly acquired institution and integrate it into McColl’s empire. As Fortune once put it, “Lewis achieved stardom in the late 1980s and early 1990s by parachuting in to impose consistent sales and expense practices on the hodgepodge of banks that NCNB was acquiring.”
By 1993 Lewis was president of NationsBank and McColl’s heir apparent as the two men continued their relentless consolidation drive, which culminated in the 1998 purchase of California’s Bank of America and the adoption of its name. Three years later, McColl stepped down and Lewis took the reins, using them to carry out what was widely seen as a reckless deal to acquire Boston’s Fleet Bank.
BofA also got itself involved in a series of scandals—such as the one involving the Italian company Parmalat—which seemed to be an outgrowth of a need by the behemoth bank to increase revenues any way possible. It was later tied to the misdeeds of the major corporate villains of the early 2000s, paying, for example, $69 million to settle a lawsuit over its role as an underwriter for Enron and $460 million to settle an action brought by investors in WorldCom. The controversies continue into the present, not to mention the dubious business practices that would force taxpayers to provide $35 billion in capital infusions.
The history of BofA over these past few decades, including Lewis’s own trajectory, epitomizes the dangerous consolidation of power and spread of venality that have overtaken much of the banking industry. Removing Lewis would not be a matter of slaughtering a sacrificial lamb but rather a long overdue move against one of those most responsible for the financial mess we are in.