Opinion

Felix Salmon

Ken Lewis and the regulators

By Felix Salmon
November 9, 2009

The WSJ has an interesting Ken Lewis profile today:

If there was a bank executive who seemed to have the mettle to withstand today’s regulatory and market pressures, it was Ken Lewis. The Mississippi native clawed to the top of Bank of America. After succeeding his mentor, Hugh McColl Jr., as chairman and CEO in 2001, Mr. Lewis kept up a blistering pace of acquisitions and tight control of operations at the bank, which expanded to $2.3 trillion in assets from some $620 billion.

But I think this misses a crucial point. Ken Lewis was always a momentum play, as most acquisitive CEOs are. So long as things are going well, they’re going great. But the minute their stock starts dropping and they lose that sense of inevitable global domination, things can fall apart very quickly indeed.

This is partly a function of scales dropping from the board’s eyes, as Carrick Mollenkamp and Dan Fitzpatrick explain. But it’s also a question of character: some CEOs are emboldened when their companies go through a rocky patch, while others are weakened — and Lewis is clearly one of the latter. (John Mack, who famously told Tim Geithner to “get fucked” at the height of the crisis, would be one of the former.)

In other words, Lewis never had the mettle to withstand regulatory pressure, should it ever arise. Other acquisitive CEOs like Sandy Weill are the same way. They’re like central banks intervening in currency markets: they can push regulators to move further in the direction they’re already moving, but they can’t push back once regulators become aggressive. That’s why Weill stepped down, and that’s why Lewis stepped down too.

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