Recommended Reading - Bank chiefs likely to stay in place, CNNMoney

David Ellis of CNNMoney wrote a story today analyzing why many experts think bank CEOs in troubled banks will remain in their jobs. While I do not fully agree, the story is a very worthwhile read.

Recommended Reading - Banker Pay May Escape Obama Caps As Wall Street Eyes Guidelines, Bloomberg

Christine Harper, Pat Wechsler and Matthew Benjamin wrote a piece today for Bloomberg examining the possibility that the Obama administration may relax the compensation restrictions on the banks that have received TARP money. The restrictions were imposed by Congress after Merrill Lynch executives had received bonuses while the company was floundering and already under purchase from Bank of America. The story quotes Gary Parr, the deputy chairman of Lazard Ltd.,

“It is clear that the government’s going to have to come out with some guidelines on what will compensation be at the big institutions that have TARP,” … “There’s going to need to be something done so that there isn’t a picking off of certain institutions where they’re at a severe disadvantage to others.”

The authors of the story also referred to research by Liberum on turnover in the financial industry and how those numbers might impact Congress’ view on the compensation question. Check out the story if you are interested in executive compensation or the government bailout of the financial industry.

Bloomberg's Reilly Calls for Ken Lewis' Head

David Reilly a news columnist for Bloomberg earlier today suggested that Bank of America’s chairman and CEO Kenneth Lewis should be forced out or at a minimum should give up one of his positions.  According to Reilly,

Kenneth Lewis gambled big. He lost. Now taxpayers have to pick up his tab.    

For that, the Bank of America Corp. chief executive officer probably needs to go. At the very least, Lewis, who also is chairman, should give up one of his posts to bring greater accountability to the bank. 

Reilly is not particularly focused on BofA’s acquisition of Merrill and the subsequent difficulties that have resulted as the main reason for his call but rather Lewis’ series of ill-fated acquisitions (Countrywide etc.) and business steps that have all come together to force the bank to go to the government for money to complete the Merrill transaction.  Reilly went on to say,

Now the Charlotte, North Carolina-based company is staring into the abyss. The bank’s stock fell about 18 percent yesterday following reports that it told the government in December that it wouldn’t be able to close the Merrill deal without assistance because of bigger-than-expected losses at the brokerage.    

The government may now have to inject more capital into the company or backstop losses on a portion of its assets, or some combination of the two. The government has given Citigroup Inc. a similar guarantee against losses on some assets, although that hasn’t kept investors from fleeing its stock. 

I suspect Lewis will remain CEO and may be forced to give up the chairmanship but we will just have to see how this all plays out.  

For more:

UK Telegraph

Portfolio.com  

New York Times

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