What We're Hearing

Watching CNBC today you might bet that Bank of America CEO Ken Lewis is walking the gangplank and could be canned at any moment. Of course it's nice blah, blah, blah for the cable business news blathersphere but will the board actually toss him into the sea? (He might lose the chairmanship but will hang on as CEO.) The bank is holding its annual meeting in Charlotte as I write this. (Protestors are picketing outside the 2,000-seat theatre where the meeting is being held.) Still, the bank's shareholders need to ask these questions in regard to the bank's purchase of Countrywide Financial and Merrill Lynch: what did he know about the sorry state of their mortgage operations and when did he know it? In late 2006 Merrill paid $1.2 billion for subprime giant First Franklin which crashed and burned a year later. Merrill was also a major subprime warehouse lender, securitizer and investor. Didn't Lewis have a clue about all that? And if he did, why did he cave to Treasury chief Hank Paulson who urged him to buy Merrill anyway? And what about Countrywide? Sure, BoA only paid $4 billion or so and took over $1.4 trillion in housing receivables, but what did Lewis know about the $80 billion in high risk mortgage assets (payment option ARMs, HELOCs and unsellable alt-A and subprime loans) that Countrywide was holding on its balance sheet? Stay tuned…