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Ken Lewis: the master of acquisition and stimulus (Part I)

8 March, 2009

Ken Lewis had already learned a great deal about acquisition and bailout before he became CEO of Bank of America.

He’d gone to work for Hugh McColl’s North Carolina National Bank [NCNB] in 1969 straight out of college.  McColl was an aggressive man, intent on building NCNB into a major bank through acquisition.    Lewis  began work in the

“credit analysis department. His first assignment: analyzing Bank of America, then a San Francisco-based institution with an extensive statewide branch network and innovative products such as the BankAmericard, then the No. 1 mass-market credit card and a precursor of Visa…“I got the appreciation for the size of NCNB versus Bank of America at the time,” Lewis said. It was a lesson he never forgot. (Bloomberg)

Lewis worked his way up the company ladder, holding a variety of positions and his style must have impressed McColl.  In 1985  McColl sent Lewis to Florida to manage the NCNB’s latest acquisitions in Florida.  His management style was clear from the beginning.

Lewis closed redundant branches, dumped nonperforming loans and poached corporate and retail customers from rivals.  ((Bloomberg)

Florida was just the beginning.  In 1988, Lewis was asked to perform the same feat in Texas.    McColl had just bought the First Republic Bank of Texas, but it was losing money because of the shaky financial conditions in the oil dependent state.  Republic was the largest bank in Texas and politicians did not welcome the takeover.  Lewis managed to again streamline the business operations of the bank, despite opposition and was even able to obtain

a government-assisted rescue that included an estimated $2.9 billion in tax incentives (emphasis mine)


The IRS in 1988 allowed NCNB to deduct First Republic’s previous losses to offset other NCNB income.(emphasis mine). Using those losses “turned out to be a brilliant way for what was then called NCNB to enter Texas,” said [Frank] Hirsch, a banking lawyer at Nelson Mullins Riley & Scarborough who previously worked in Charlotte.


A House Budget Committee task force in 1991 concluded that the FDIC’s agreement provided NCNB with overly generous subsidies, while taxpayers retained most of the risks. (emphasis mine) (Bloomberg)

There is no record that NCNB was asked to return the subsidies that helped the bank grow; as usual, the taxpayer was left holding the ‘bill’.

By 1990, the acquisition was so successful that McColl changed the name of NCNB to NationBank and Kenneth Lews had become McColl’s heir apparent.

Just eight years later in 1998, NationBank acquired Bank of America, which Lewis had set his sights on back in 1969.  Lewis and McColl liked the name of their new acquisition so much that they changed the name of their bank to Bank of America.  It is, after all, a grandiose name for a bank aspiring to be number one in the country.

Three years after the acquisition of Bank of America, Kenneth Lewis was CEO of BofA.  He took sometime to consolidate the various acquisitions the bank had acquired while McColl had been CEO as well as some of the departments at the bank itself.

He didn’t wait long before the urge to accumulate got stronger again.

In 2003, Lewis began his own spree of acquisition as the bank

…expanded into the six-state New England market with the $48.1 billion all-stock acquisition of Boston-based FleetBoston Financial Corp. And in June 2005, he unveiled the $35.4 billion cash-and-stock purchase of MBNA Corp., the Wilmington, Delaware-based credit card behemoth. (Bloomberg)

In 2007, BofA acquired LaSalle Bank Corp.

Despite troubles consolidating all the various acquisitions, divisions, departments and employees, Bank of America remained strong. It was fast becoming one of the countries largest banks.

And then in 2008, along came Countrywide Financial.

to be continued soon…

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