Banks like to pretend that they still have their capitalistic swagger just take a look at the somewhat implausible defiance of Goldman "we didn't need a bailout" Sachs last week but Uncle Sam is still undoubtedly calling the shots for some of them.
The best and most instructive example is Bank of America chief executive Ken Lewis. Lewis, who has always hoarded power and earned a reputation as a standoffish, acid-tongued loner, grudgingly acknowledged last week that three executives are now engaged in a race to succeed him: former Goldman Sachs and Merrill Lynch trading executive Thomas Montag, former Citigroup executive Sallie Krawcheck, and former Fleet executive Brian Moynihan.
It is completely out of character for Lewis to finally agree to cede some power to a future successor a full three years before the firm's traditional retirement age of 65. It is also the strongest sign yet that the government agencies and regulators, including the Federal Reserve and the Securities and Exchange Commission, have become disinhibited about meddling in the day-to-day management of struggling bailed-out banks. The SEC recently seized upon Lewis's lack of candor with shareholders before the acquisition of Merrill Lynch, and Federal Reserve chairman Ben Bernanke appeared to threaten Lewis with the loss of his job last year. The succession race follows on the heels of the government's months-long effort to weaken Lewis's control of Bank of America's board of directors by making way for federally approved replacements.
Lewis, 62, has ruled the bank since 2001 with an easy southern drawl that belied his sharp temper and habit of undermining the careers of potential successors including the unfortunate $35,000-commode poster boy John Thain. In eight years, as Bloomberg points out, Lewis went through four finance chiefs and five heads of investment banking.
Tellingly, not one of the three executives is a Lewis loyalist or protégé (mostly because there is no such thing). Montag was lured to Merrill Lynch with a $50 million pay package promised by former Merrill chief executive John Thain. Krawcheck, once labeled "the last honest analyst" by Fortune, is clearly being brought in for credibility. Moynihan rose through the ranks at Fleet. Lewis handed him responsibility for the businesses Lewis dislikes most: investment banking and Europe.
These three executives are lucky. For years at Bank of America, success was the easiest way to cut an executive career short. Consider former investment-banking chief Carter McClelland, who left a career at Deutsche Bank and Morgan Stanley to spearhead Bank of America's growth in investment banking, starting in 1998 by hiring hundreds of bankers. McClelland, a key architect of BofA's growth, resigned in 2005 for no discernible reason.
Or look at Eugene Taylor, a good friend and tennis buddy of Lewis's, who took on the mammoth job of getting the firm's investment bankers snappy Wall Street mergers-and-acquisitions veterans to play nice with the boring, underpaid commercial bankers who made loans to companies. The two groups hated each other, but Taylor succeeded in integrating them. In 2007, a Lewis-led restructuring pushed Taylor into early retirement.
The most spectacular example of Lewis's political sharp elbows is the shaming of Thain over the leak of the $1 million bill for redecorating his Merrill office. Merrill paid Thain's bill in January 2008 but the public didn't hear about it until January 2009, shortly after Lewis received bad press for fighting the government on the Merrill acquisition. Not only was the commode dustup a valuable distraction, it provided an excellent excuse for Lewis to fire his expected successor.
It might seem implausible that the government is ruling Wall Street. The $700 billion bailout and guarantees lavished on banks have made our federal officials look like the careless nerdy kid who gets his lunch money stolen by the jocks. But a succession race at BofA for the first time in a decade that's a sign of your taxpayer dollars at work.