BofA CEO Lewis says nationalization is 'absurd'

[February 07, 2009]  CHARLOTTE, N.C. (AP) -- Bank of America Corp. Chief Executive Ken Lewis capped off a week of defending his bank and his role in it on Friday by firing back against rumors that his company could be in danger of nationalization.

"It's absurd," Lewis said in an interview on CNBC, adding that he knows of no government officials who have talked about nationalizing the bank.

Treasury Secretary Timothy Geithner and other top officials are close to finishing a plan to overhaul the government's $700 billion financial rescue fund. Some investors in recent days have been worried that the government's latest revisions to its lifeline for banks would involve nationalizing many banks.

Speaking generally about the banking industry, Lewis reiterated the strength of his Charlotte, N.C.-based company, saying that BofA would not need additional federal funding and still believes its acquisition of brokerage Merrill Lynch & Co. was the right move.

"It's been painful ... I am still as convinced as ever that strategically this make sense," Lewis said in the CNBC interview.

The interview was Lewis' latest effort to convince employees and investors that he and his management team can lead the bank out of its current crisis.

Earlier in the week Lewis spent almost a million dollars buying shares of his struggling bank and posted a memo to employees that said the bank's board "unanimously endorsed our business model, strategic direction and the team," at its regular meeting on Jan. 28.

Bank of America shares rose $1.29, or 26.7 percent, to close at $6.13 Friday, after falling to a 25-year low - or $3.77 - in trading Thursday afternoon.

"Investors believe that this bank is about to fail and be nationalized by the United States government," wrote Ladenburg Thalmann analyst Richard Bove in a research note late Thursday.

He added those fears "make no sense whatsoever," and he rates Bank of America's shares a "strong buy."

Lewis purchased 200,000 Bank of America shares for $958,340 on Wednesday, according to a filing with the Securities and Exchange Commission on Thursday. It's the second time in recent weeks that Lewis has pumped his own money into the bank. Two weeks ago, he bought 200,000 shares for $1.2 million.

The bank's shares have been pummeled in recent days following the disclosure of the bank's first quarterly loss in 17 years and mounting concerns about its recent Merrill Lynch acquisition.

Last week, Lewis went before his directors in Charlotte for "the longest board meeting in anyone's memory," he told employees in the memo issued Monday.

Some analysts said Lewis' job might be on the line, but lead director O. Temple Sloan Jr. later issued a statement of support for the bank's management team.

In the memo, Lewis called the company's performance in January "encouraging."

He also acknowledged employees are disappointed about cuts to their bonuses. He noted that higher-ranking executives are taking deeper reductions and that neither he nor his top lieutenants are receiving payouts for 2008, according to the memo.

Last month, it was learned that Merrill Lynch, with Bank of America's knowledge, had moved up year-end bonuses for executives so they could be awarded before the acquisition was formalized Jan. 1. The bonuses were given as Bank of America was approaching the government for more money.

Former Merrill Lynch CEO John Thain, who had taken over as head of the combined company's wealth management business, resigned after news of the bonuses broke.

Thain and Bank of America's chief administrative officer, J. Steele Alphin, have been subpoenaed by New York Attorney General Andrew Cuomo amid an investigation into the timing of the Merrill Lynch bonuses.

On Monday, North Carolina Attorney General Roy Cooper also made a request for documents from Bank of America about the bonuses. The North Carolina Department of Justice issued an "investigative demand" seeking records, including a list of Merrill employees who received bonuses.

Bank of America is required to respond by March 4, according to the 11-page demand.

"Public money is at stake," Cooper said in a statement.

Bank of America has already received $45 billion in government aid, including a $20 billion injection last month to help it absorb losses from its Merrill Lynch acquisition.

Lewis told CNBC he hopes the bank can pay back the $45 billion within three years.

Lewis also said he does not "feel good" about the $500,000 salary cap imposed by Obama for firms receiving relief funds, expressing concern that employees could be lured to foreign banks.

"It's not me," said Lewis, who made more than $20.4 million in 2007, according to an analysis by The Associated Press. "I'll take $500,000."

[Associated Press; By IEVA M. AUGSTUMS]

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