Bank of America CEO says recession under attack on many fronts
Kenneth D. Lewis(Boston Globe) Bank of America chief executive Kenneth D. Lewis answers questions at a Boston luncheon sponsored by Boston College, and a short press conference afterwards.
By Ross Kerber
Globe Staff / March 13, 2009
For an executive whose bank is under pressure onmany fronts, Kenneth D. Lewis sounded remarkably optimistic in Boston yesterday.
The chief executive of the nation’s largest lender, Bank of America Corp., who has been pilloried for accepting $45 billion in taxpayer funds, urged an audience at a lunchtime speech downtown to look beyond the recession now weighing on the country to budding signs of an economic recovery.
"I believe we are going to break the back of this thing, and I still believe we’ll do it this year," Lewis said of the recession that has settled in. "There is too much ammunition being fired from too many directions not to bring this beast down."
The flood of government aid and stimulus spending, he said, is helping to improve lending and fueling business activity; more signs of a bottom in the housing market are cropping up, he added, and banks are on the mend. His own company, Lewis said, has so far been profitable this year, and is poised to record earnings of nearly $50 billion in 2009 before taxes and loan losses.
Lewis was hardly a lone voice of sunshine yesterday. Ailing carmaker General Motors Corp. said it would not need an additional $2 billion in US government aid because it was making progress on a cost reductions. Meanwhile, fabled Omaha investor Warren Buffett said in a television interview he sees buying opportunities in current markets, while another prominent investor, David Swensen, head of Yale University’s endowment, called on investors to be "enthusiastic" about stocks at current low prices.
Lewis spoke before an audience hungry for good news about the economy – members and guests of the Boston College Chief Executives’ Club – while another audience, the investment world, was also receptive to the banker’s words. Bank of America’s stock rose 19 percent yesterday, one of the bigger gainers on a day when Wall Street posted another strong rally.
"Everyone came out of the room feeling better that we may have begun to turn in the right direction," said Robert K. Sullivan Jr., managing director of the Boston office of national recruiting firm Korn/Ferry International.
Lewis was in friendly climes. The business audience, which included Patriots owner Robert Kraft, State Street Corp. chief executive Ronald E. Logue, and Partners HealthCare System Inc. chief executive Dr. James Mongan, gave him a warm welcome, strong applause, and no hostile questions.
But Lewis and his bank have been a frequent target of politicians, labor leaders, and other critics who have questioned whether Bank of America has done enough with the billions in taxpayer funds to improve the lending climate.
In the last quarter of 2008 alone the bank lost nearly $2 billion, figures that didn’t even include its purchase of ailing brokerage Merrill Lynch in the fall.
Moreover, Lewis has been criticized for refusing to provide investigators with more information about the hefty bonuses paid to Merrill Lynch executives before Bank of America bought it at the end of 2008.
Just last week a coalition of labor groups called for Lewis’s ouster over the bonuses at Merrill and what they said was a failure by Lewis to promptly disclose more than $20 billion in pretax losses at Merrill.
Some economists and politicians have suggested Bank of America, Citigroup, and other troubled banks be nationalized, or completely taken over by the government, a notion Lewis sought to knock down hard yesterday.
Such a move would "immediately undermine confidence in the financial system even further and send shudders through the investment community. It would give the false impression that banks are insolvent, and investors would immediately start betting on which banks would be next," Lewis said.
Bank of America bought FleetBoston Financial Corp. in 2004 to become the largest bank in New England and in Massachusetts. By the latest counts it had about 8,000 employees, 309 branches, and $37 billion in deposits, or 20 percent of money in the state.
In his talk Lewis also answered other criticisms swirling around the bank.
On the hot-button issue of limiting executive compensation, he said that too many pay restrictions could drive employees to work for competitor banks.
Meanwhile, the bank’s spending on sports marketing, including sponsorship deals with Major League Baseball, football, and NASCAR, returned $10 in revenue for every dollar spent – an answer to labor groups and others that have charged sports spending amounts to public subsidies for the teams.
"This is not wasted money. It’s money that drives business results," he said.
Ross Kerber can be reached at kerber@globe.com.
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