Ken Lewis is a Goner
Bank of America (BAC) dropped to the $2.50 level today and has a market cap below 15 billion. There is much speculation that the bank will be taken over by the government and nationalized. If Bank of America is nationalized stockholders and debt holders would essentially be wiped out. This weekend will be very telling for Bank of America. I would expect that that government would be in talks with Bank of America about a possible nationalization plan. Even if Bank of America is able to remain private Ken Lewis is a goner. He won’t be able to survive this. There will be various lawsuits from shareholders and debt holders and it’s unlikely that investors have any confidence in his leadership after the Merrill Lynch acquisition. He could have survived the Countrywide purchase but the Merrill Lynch acquisition has likely done him in. He knew about the toxic assets at Merrill and still went ahead with the deal. He may be held liable for not disclosing this information to shareholders. There are also reports that Lewis is losing the confidence of senior management.
Citigroup (C) is in an even worse situation. Citigroup has declined to $1.61 and its market cap is now below 10 billion. This is unbelievable. Citi does not have the deposit base of Bank of America and is trying to sell of assets in a depressed economy. I don’t see anyway that Citigroup can stay a private firm. If Citi breaks the $1 level the former banking giant will have to be nationalized. Pandit may need to go as well. Although he didn’t create all of the Citi’s problems, Pandit may have to go to boost investor confidence in the stock.
Yep, I think you are right. Ken is a goner and so is BofA. It will be a sad day when we start Nationalizing our banks.