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According to a Wall Street Journal report (subscription required) on Monday, Bank of America (NYSE: BAC) is set to choose an emergency chief executive officer (CEO) -- just in case Ken Lewis (the current CEO) is forced to step down thanks to legal issues. The decision was in the works before Lewis announced he would retire effective New Year's Eve, but the situation ramped up after New York Attorney General Andrew Cuomo hinted that he may file civil charges against Lewis.
Five people comprise the committee that was formed earlier this year, with Bank of America Chairman Walter Massey leading the way. The committee was originally created to respond to concerns raised by U.S. banking regulators, but it has now shifted its focus a bit. The committee will give the choice to the full board for approval, but then the U.S. banking regulators will have to approve the choice, basically allowing the government to hand pick their choice. Once this process runs its course, the plan will then be shuttered until it is needed.
In other news, the special inspector general for TARP decided that Fed officials and Treasury officials did not advise Bank of America to keep the growing losses at Merrill under wraps. The investigators did decide that those same officials put some pressure on BAC to complete the Merrill deal. This decision boils down to the need for complete transparency when government programs are enacted.
It is good to see that Bank of America is readying a worst-case scenario just in case Ken Lewis is ousted before his time with the company concludes at the end of the year. Of course, it would have been nice to have seen a bit of oversight over Lewis back before Pandora's box was opened -- but that is a different subject for a different day. What I am a bit concerned about is the government's hand in the selection of the emergency CEO. Does this foreshadow what will happen when a permanent CEO is chosen? I'm not sure I want the government to hand pick a permanent successor to Lewis ... of course the Bank of America board didn't do too well last time.
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