- The Washington Times - Thursday, April 30, 2009

Dissident shareholders at Bank of America succeeded in stripping the chairman’s title from Kenneth Lewis but failed to oust him or other directors from the board at the company’s annual meeting Wednesday.

Mr. Lewis will remain chief executive officer and president of the Charlotte, N.C., bank.

Irate shareholders wanted to oust Mr. Lewis in part because the bank’s stock price has collapsed 75 percent since he offered to pay $50 billion for Merrill Lynch in September.

During the mid-September weekend that Lehman Brothers imploded into bankruptcy, Mr. Lewis offered to pay $29 a share for Merrill, whose stock was worth just $17 at the time. Merrill went on to lose more than $15 billion in the fourth quarter.

Dissident shareholders were angered that Mr. Lewis failed to tell them about Merrill’s staggering loss in December before they voted to approve the Merrill purchase, which was completed Jan. 1. They were also bothered by the $3.6 billion in bonuses that Merrill paid out in December despite losing $27 billion last year.

When Merrill’s fourth-quarter loss was revealed in January, the federal government had to provide an additional $20 billion in bailout funds to Bank of America on top of the $25 billion in bailout money previously doled out to Bank of America and Merrill.

At the annual meeting, Mr. Lewis said shareholders were not told about Merrill’s pending losses because he feared that canceling the deal might have destabilized an already fragile financial system.

Mr. Lewis has testified before New York Attorney General Andrew Cuomo that Treasury Secretary Henry M. Paulson Jr. threatened to fire him and the bank’s board of directors if he acted on his instincts to pull out of the Merrill deal in December. But the decision to proceed was “not about selfish desire” to keep his job, he told shareholders Wednesday.

Bank of America’s market capitalization exceeded $150 billion when Mr. Lewis offered to pay $50 billion for Merrill Lynch. The market cap of the combined companies plunged to $16 billion in February but has recovered somewhat since then, reaching $52 billion as shareholders convened.

“I know the Merrill deal played a role in the collapse of our stock price, but I don’t believe it is solely responsible for its decline,” Mr. Lewis told shareholders.

“I find it incredible you didn’t have the guts to stand up to the U.S. government,” Judith Koenick of Chevy Chase told Mr. Lewis at the meeting.

Mr. Lewis emphatically rejected criticism of his decisions to purchase both Merrill Lynch and Countrywide Financial Corp., the troubled mortgage lender.

“Countrywide and Merrill Lynch are two of the most important reasons Bank of America is the most profitable financial-services company in the United States so far this year,” said Mr. Lewis, whose bank earned $4 billion last year and $4.2 billion in the first quarter of 2009.

As competing groups battled in Charlotte, New York-based Citigroup, which has received a $50 billion bailout from taxpayers, is seeking permission from the federal government to pay special bonuses to key employees at Phibro, its energy-trading unit. Although Citigroup lost $27.7 billion last year, Phibro generated several hundred million dollars in profit.

“Stress tests” recently conducted by regulators on 19 of the nation’s largest financial institutions revealed that both Citigroup and Bank of America need to raise additional capital. Both banks are appealing those decisions.

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