Banking boomtown loses one of its biggest players. Charlotte, N.C. is the country's second largest banking center, but the recent failure of Wachovia has the entire city bracing for fallout from thousands of executive-level layoffs. NBC's Kerry Sanders reports.
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The Best Job No One Wants
A new CEO for Bank of America could be chosen as early as Sunday, reports Charlie Gasparino. Inside a selection process beset by rivalries, government pressure—and most of all a lack of interest from top candidates.
The board of directors of Bank of America is trying to pick a successor to Ken Lewis, and it really, really wants to finish the job on Sunday night, a senior BofA official tells me. The board is trying to get the job done, this official also tells me, because it’s sick of all the controversy surrounding the selection. Members have been divided over the internal candidates. Others are angered that no one on the outside wants the job of running a bank that is being investigated by the New York attorney general, among others, partially owned by the federal government and thus open to harassment by Rep. Ed Towns, Rep. Barney Frank, various bureaucrats at the Fed, and the giant SEIU, which wants to organize tellers and has a direct line into the Obama White House.
They’re also kind of annoyed at the press, me in particular, for calling the selection process—one that has lasted weeks longer than it should have and featured a prominent board member going on vacation—dysfunctional.
So they want to move and move fast, at least as fast is defined down there in Charlotte, the headquarters city where these decisions get made. Even so, this executive reminds me that the board is still divided over internal candidates and hasn’t settled on someone from the outside to take the job. He also reminds me that the selection process is still beset by rivalries among various board members and pressure from the feds to find someone with better qualifications than senior executives already at the firm. In other words, he concedes, the process is pretty dysfunctional, so it might take a week or, as far he knows, longer than that to announce the new CEO.
Now you know why no one wants this job.
And it’s a shame, because Bank of America is more important than the joke it has become after Lewis purchased Merrill Lynch at the height of the financial crisis for $50 billion, only to later find $15 billion in losses on Merrill’s balance sheet, forcing him to seek a federal bailout to keep the big bank afloat. It’s one of those “systemically important” places that regulators like to say are way too big to just implode and go away, because if it does, billions of customers’ deposits must be covered by FDIC insurance, not to mention all the trading and brokerage accounts at Merrill Lynch that must be unwound, patched up, and placed in safer hands, if there are any left.
Back in the 1950s, there was a saying, “as GM goes, so goes the nation.” General Motors, thankfully, doesn’t carry as much economic weight these days—it was bailed out by the government along with the banks, and look at the trouble we’re in—but Bank of America does, which is why finding someone to run the place is so important.
And that person will have not just to integrate the troubled Merrill Lynch acquisition, he also might have to guide the bank through another banking crisis. Analysts I speak to aren’t all that placated that the banks are healing even as the economy starts to produce growth. The economic growth we have is still being accompanied by rising unemployment, now at 10.2 percent but edging close to 10.5 percent.
What does that mean for Bank of America? Consider the following: The financial firms may have written down much of the residential mortgage debt—the collateralized bond obligations and mortgage-backed securities—that were at the heart of the financial crisis last year.
But consumer-related loans—credit-card receivables, car loans, etc.—are just starting to default, and commercial real estate isn’t doing so hot, either.
So far those defaults haven’t overwhelmed the money BofA has made by borrowing at low rates (the Fed has taken its base rate down close to zero), buying bonds, and carrying those bonds on its books at a higher interest rate. That might change, analysts tell me, if unemployment rises to around 11 percent. That’s when the profitable bond trades are overwhelmed by the consumer debt losses. BofA’s modest profits could well disappear, forcing the bank to raise more capital and who knows what else.
So here’s to hoping this weekend or next weekend or whenever it sees fit, the BofA board finds the right person for the job. Some analysts I know aren’t so optimistic. When banking analyst Mike Mayo heard that the board might be forced to turn to an inexperienced internal candidate because smart people like Larry Fink of BlackRock and Bob Diamond of Barclays Capital didn’t want the job, Mayo had a solution:
Chuck Prince, the former CEO of Citigroup, the other big bank in worse shape than BofA.
The reason: At least he has experience running a failing bank.
Bank of America’s Next Chief May Be Based in New York
Bank of America Corp. broadened its search for a chief executive officer to include candidates who want to live in New York, acknowledging the bank’s biggest units are no longer based in its home of Charlotte, North Carolina, people familiar with the matter said.
The board, led by Chairman Walter Massey, is also concerned there may not be a deep enough pool of qualified candidates willing to move to Charlotte, 330 miles south of Washington, the people said, speaking anonymously because the search is private. CEO Kenneth Lewis, who is stepping down at year’s end, has said Charlotte will remain headquarters as long as he’s in charge.
“It does reflect well on the board that they’re not going to let the headquarters location limit their selection in terms of CEOs,” said Thomas Brown, CEO of New York-based hedge fund Second Curve Capital. “There aren’t too many people around the world who think that Charlotte is a major financial center.”
Five board members with ties to Charlotte have stepped down during the past two years, and none of their replacements lives in the city, the state’s largest. New directors live in Alabama, Delaware, New York, Ohio, Texas and Virginia. Lewis, 62, is the only North Carolina resident.
Curl, Moynihan
The leading internal CEO candidates are Chief Risk Officer Gregory Curl, 61, who lives in Charlotte, and consumer-banking chief Brian Moynihan, who almost left the bank last year after he declined to take a new post in Wilmington, Delaware, according to a person familiar with the situation. Moynihan, 50, lives in Boston, where he worked for FleetBoston Financial Corp. until Lewis bought the lender in 2004.
“We aren’t going to comment on speculation on the process,” bank spokesman Jerry Dubrowski said.
Former Bank of America CEO Hugh McColl Jr. told a Charlotte group on Oct. 22 that it’s unclear whether the next CEO will be based in the city, according to four people who heard his comments at the meeting, which was sponsored by Queens University of Charlotte. McColl engineered the 1998 acquisition of San Francisco-based BankAmerica Corp., stipulating Charlotte’s role as headquarters. He emphasized that he no longer influences the board’s decision-making, according to the people who heard his comments.
McColl didn’t return telephone calls seeking comment.
The Finger family in Houston, owners of more than 1 million Bank of America shares, said in a regulatory filing today that Moynihan and Curl aren’t suitable candidates and provided a list of 18 alternative choices. Their suggestions include former Bank of America executives Alvaro de Molina, now the CEO of GMAC Inc., and James Hance, chairman of Sprint Nextel Co. The Fingers sponsored a campaign earlier this year to oust Lewis.
Calabasas, Wilmington
Bank of America’s investment banking and wealth-management businesses, which are run from New York, made up half of revenue through Sept. 30, up from 34 percent in the same period last year, before the acquisition of Merrill Lynch & Co.
“With Merrill Lynch being such a big part of the ball game, the CEO probably ought to be in New York,” said Arnold Danielson, chairman of Danielson & Associates, an investment- banking firm in Bethesda, Maryland.
The home loans and insurance unit, which account for 14 percent of revenue, is based in the former Calabasas, California headquarters of Countrywide Financial Corp., which the bank acquired in 2008. The credit-card services unit makes up 23 percent of revenue and is based in Wilmington.
The consumer-banking business under Moynihan in Boston made up 11 percent of revenue. All told, that means about 98 percent of the bank’s revenue comes from units headed by executives based outside Charlotte.
Charlotte Jobs
Massey leads a search committee of six directors, three of whom joined the board upon the FleetBoston acquisition. They include retired FleetBoston CEO Charles “Chad” Gifford, who lives in Boston.
“Some of the Fleet members have no allegiance to Charlotte,” Brown said.
The North Carolina city was home to two of the four biggest U.S. banks until San Francisco-based Wells Fargo & Co. bought Charlotte-based Wachovia Corp. in an October 2008 sale brokered by government regulators.
Bank of America employs 15,000 people in its hometown, said Bob Morgan, president of the Charlotte Chamber, a group that promotes local business interests. That’s about 5 percent of the bank’s global workforce of 281,863. Wells Fargo has about 19,000 employees in the city after cutting about 2,000 jobs there during the past year, Morgan said.
New Yorkers contacted about the job include Charles Scharf, retail banking head at New York-based JPMorgan Chase & Co., a person familiar with the matter said. Robert Kelly, CEO of Bank of New York Mellon Corp. and a former Wachovia chief financial officer, “has said he has no interest in the job,” spokesman Kevin Heine said today.
A JPMorgan spokesman, Thomas Kelly, declined to comment on behalf of Scharf.
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Sources: The Daily Beast, BOFA, MSNBC, McClatchy Newspapers, Charlotte Observer, Wikipedia, Google Maps
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