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November 2, 2009 Monday 09:06 AM EST
SECTION: NEWS & ANALYSIS; Banks
LENGTH: 999 words
HEADLINE: Bank of America CEO Search Finds Outsiders Uninterested
BYLINE: Lauren LaCapra, TheStreet.com Staff Reporter
CHARLOTTE, N.C. (TheStreet) -- Bank of New York Mellon (BK:NYSE) CEO Robert Kelly's reported rejection of an offer to take the same job at Bank of America (BAC:NYSE) illustrates the difficulty of convincing a talented outsider to lay his head at BofA's door for the next several years.
Even for lower-level managers and associates, the proposition is bleak in today's environment. The possibility that BofA has room to grow becomes ever-more narrow as the chorus for breaking up the largest financial firms in the country becomes louder and more hostile.>> Photo Gallery: The Bank of America CEO Contenders
After enduring criticism for months over the "too big to fail" issue, Treasury Secretary Timothy Geithner told Congress on Thursday that he will seek new regulatory powers to break up such firms. Bank of America is the largest bank in the country. If those authorities are approved, it will also be the bank most likely to be broken up.
It is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision. Furthermore, Bank of America's pay packages are likely to be among the least competitive in the industry, after the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average large salary by 50%.
The merits of the "too big to fail" argument can be debated, but the CEO situation is fairly logical. High-powered executives who have spent decades building their reputations generally want to move on to new roles that offer challenges, along with rewards. The Bank of America job will require experience, connections, political savvy, patience and longevity. It will not come with a rock star's salary, and may deal more with regulatory negotiations than the business of banking for many years to come.
At the same time, there are parts of the banking industry that are poised for tremendous growth after the downturn. While BofA may have reached its peak in size and might, other banks and private-equity shops around the country are seeking opportunity in the trenches. They are ready to acquire the businesses of failed competitors, or make loans to capital-starved consumers and businesses in their absence.
One might assume that there have to be a few financial executives out there who have done their time, and are ready to perform their patriotic duty by turning around the biggest bank in the country. Such an accomplishment would bolster their reputation if not their coffers, and allow them to retire with greater peace of mind. But there have already been a few ill-fated examples of this well-intentioned impulse.
For instance, Edward Liddy agreed to run AIG (AIG:NYSE) for $1 per year in compensation, but left after intense grilling by lawmakers about billions in executive pay packages that were approved before he got there. David Moffett offered to take on a similar role at Freddie Mac (FRE:NYSE), but had little patience for regulators micromanaging his decisions. Each left within months of accepting the jobs. Herbert Allison did the same at Fannie Mae (FNM:NYSE), taking a job at the Treasury Department instead.
Even Citigroup's (C:NYSE) Vikram Pandit has reportedly had to fight tooth and nail to maintain his position, despite opposition from Federal Deposit Insurance Corp. Chairwoman Sheila Bair. BofA's departing chief executive, Ken Lewis, wasn't so lucky. Though not pushed out directly, he leaves after months of bashing, litigation and intense investigations into an acquisition that regulators strongly urged him to move forward with.
Of course there are several internal candidates who would happily replace Lewis. Chief Risk Officer Gregory Curl and Brian Moynihan, head of consumer and small business banking, are thought to be the top choices. But that idea has become ever less popular as shareholders urge the board to choose a replacement with no ties to the Merrill Lynch deal, who can inject new life into the depleted and dispirited bank.
But Kelly isn't the only best-in-breed banker to turn down the top job offer at BofA. The board reportedly extended its deadline to find a replacement due to a dearth of interested outside candidates.
Former Bear Stearns CEO Alan Schwartz is among those reportedly approached who turned down the job, as did MasterCard (MA:NYSE) President Ajay Banga. Others may include Moffett; Charlie Scharf, who runs JPMorgan Chase's (JPM:NYSE) retail operations; Robert Kaplan, a former Goldman Sachs (GS:NYSE) top gun; former US Bancorp (USB:NYSE) CEO Jerry Grundhofer; American Express (AXP:NYSE) President Alfred Kelly; and two former BofA executives, Al de Molina, who runs GMAC, and James Hance. Feelers were reportedly put out to those banking chieftains, among others.
Even those on BofA's board who have a breadth of experience in the banking world demurred when offered the CEO spot on a temporary basis until a more permanent replacement could be groomed.
Kelly would be a natural choice, because he spent years in top roles at other mammoth commercial banking institutions, first at Canada's Toronto Dominion (TD:NYSE), then at Wachovia, leaving right before the bank escalated its nose dive into subprime lending by acquiring Golden West. (Wachovia, in turn, was acquired last year by Wells Fargo (WFC:NYSE), which is still dealing with the fallout from its toxic loan book.)
Kelly may have also been able to bridge the divide between the Southern-East Coast cultural rift within Bank of America. He has spent several years in BofA's hometown of Charlotte, N.C., as Wachovia's finance chief, and is also familiar with the New York banking world in his current role. But he's apparently happier at New York-based Bank of New York Mellon, a different breed of bank, but one with a strong reputation and far fewer problems to deal with than BofA.
Unfortunately for the board, which has less than 60 days to name a replacement, there ain't no love in the heart of Charlotte anymore.
-- Written by Lauren Tara LaCapra in New York
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