Ken Lewis Must Go
TSF - April 24, 2009
by Janet Tavakoli

The key issue is whether Ken Lewis disclosed losses to shareholders in the early December meeting. He did not. Furthermore, if you look at the linked article in my analysis below, it seems James Mahoney, BofA’s spokesman, was (intentionally or otherwise) part of a coverup (see January 26 WSJ article embedded in the link below).

In my opinion, the bottom line is—and was—that Ken Lewis must go.

Hank Paulson was hyped as one of the best and brightest, because he was a former Goldman CEO. But I would argue that he must believe his own hype if he thought that people would not immediately question the timing of the Merrill losses and Lewis’s disclosure. It was extremely inappropriate for him to even opine on whether Ken Lewis should disclose the losses, much less reportedly pressure Lewis not to disclose. That aside, Lewis is an adult and a highly paid CEO responsible for his decisions.

Around the end of January, I publicly challenged BofA’s representation of the timing of the Merrill losses. There were large losses in Oct/November, but it seemed primarily November, and Lewis should have known this going into the December shareholder meeting. Obviously I was only working with publicly available information and experience that Ken Lewis should probably have as well. This is my analysis. You may wish to compare this with Merrill’s fourth quarter release and subsequent admissions. :

BofA Says Merrill's Hit was in December (not November)? - January 26, 2009


Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct professor of derivatives at the University of Chicago's Graduate School of Business. She is the author of: Credit Derivatives & Synthetic Structures (John Wiley & Sons, 1998, 2001), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, 2008), and
Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street (John Wiley & Sons January 2009)


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