Ken Lewis announced yesterday that he would be resigning as CEO of Bank of America effective at the end of the year. At the time of the announcement, there was no replacement in mind.

According to CreditSights Inc. analyst David Hendler had this to say about Lewis, “He’s drifting out to sea like a dying Eskimo, knowing the company can do better and thrive without him.”

Lewis took over as CEO of Bank of America in 2001 and since that time the bank has tripled in size and become the biggest United States lender by assets and deposits. One of the biggest problems that has arisen since he had become CEO is in the past year during the financial crisis, BofA made some pretty bad acquisition decisions. Merrill Lynch has really been a downer for the company and it also acquired subprime lender Countrywide Financial. During his time at the company, he spent over $130 billion on acquisitions alone.

Bank of America has had to find itself coming into its own over this financial fiasco and maybe Ken Lewis can’t see himself at the helm anymore. The rules of banking have changed because of what is happening and definitely what has happened. He was one of the last CEO’s of a major bank (I’m talking about the banks that were deemed too large to fail) to remain in control.

Lewis has also been the target of all the anger people have at the merger with Merrill Lynch and all the controversy that stemmed from it.

While I believe that the company is just as likely to make poor decisions with anyone in control, perhaps a new pair of eyes or someone with a fresh perspective will be able to do more good for the company. After all, Bank of America is still one of the largest banks in the United States (if not the largest) and it can be good again. It just needs to take care of its customers and make sure that it isn’t hemorrhaging money like it has been in the past year.

Source

Given the current economic situation that the United States is in, consider and discuss the following.

Question:

Many consider that the government’s failure to act on and help prevent the collapse of Bear Stearns as the starting point of the current financial crisis. In your opinion was the government correct in letting this happen and what should have been done differently. More importantly do you consider this to be the starting factor of the current economic meltdown?

Answer:

The government’s decision to let Bear Sterns fail was not only a warning to financial firms but to buyers and sellers of mortgage backed securities in general. While at the time it was perceived as the right thing to do, because the government was not fully aware how connected the large financial firms had become, it unknowingly led to a sell off in the credit markets.

While I personally believe that Bear Stearns as well as other institutions should be allowed to fail, I personally would not have let the firm collapse. Warning or not, their where several indicators pointing to the possible collapse of the credit market due to a fail in the housing market largely because of the enormous amount of credit default swaps that had occurred between large financial institutions.

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