Six months ago, Ken Lewis, chairman and CEO of Bank of America, was heralded as a Wall Street savior, snapping up a tottering Merrill Lynch in a high-stakes deal and ensuring the future of his company while some of the country's most storied financial institutions fell apart around him.
In September, Bank of America acquired Merrill for $29 a share, or about $44 billion, and a seemingly ascendant Lewis bragged to reporters: "We are good at this."
What a difference a few months makes. Despite a good day Thursday, Bank of America shares have fallen 84 percent since Oct. 1. The Merrill deal has been scrutinized by Congress and the New York attorney general, and -- adding insult to injury -- the bank, like some of its top competitors, risks a takeover by the federal government.
In the face of dramatic losses to the company's stock price, Lewis, 61, remains bullishly optimistic. But many shareholders and observers are far less certain that the bank can weather the storm of the financial crisis.
Laying the blame squarely on Lewis, who succeeded the larger-than-life Hugh McColl in 2002, some doubt the current CEO will be able to keep his job if the company continues to hemorrhage money, while other investors are calling for his resignation outright.
"It is going to be very difficult to watch the stock price go from $40 to $5 and be able to survive that," said Paul Miller, a banking analyst at Friedman, Billings, Ramsey & Co. "This is his baby. He did the acquisitions of Merrill, Countrywide and LaSalle Bank. How anyone can make the decisions he made and survive is baffling."
Beginning last summer, as pillars of the economy fell, from Countrywide -- then the nation's largest mortgage lender -- to Merrill -- a stalwart of the financial services industry -- Lewis bought them up, putting a damper on the bank's balance sheet.
Some shareholders believe the government's funding gives the bank enough revenue to protect it from exposure to risky mortgage assets from Countrywide and Merrill. The bank, they say, is also insulated by a steady stream of capital from depositors. Furthermore, they argue, had Lewis not acquired Countrywide and Merrill Lynch, the impact to the overall economy would be devastating.
Supporters Say Lewis Kept the Bank Liquid
For those supporters, Lewis' bullish optimism expressed in the Op-Ed pages of the Wall Street Journal and in the halls of Congress buoys their confidence in the market, the bank, and the man.
Offering a comment only once ABCNews.com had published this story, bank spokesman Scott Silvestri said, " We made $4 billion last year. We've had a profit in every quarter for 17 years except for the fourth quarter of 2008."
Not everyone agrees with that sentiment. Just because the bank is liquid does not mean Lewis is running the company properly, said James Ellman, a former Merrill Lynch money manager and current president of Seacliff Capital, a San Francisco-based investment firm.
"Every bank in the country can operate and open for business even if the share is a penny instead of $10 dollars, because they're backed by the FDIC and full faith and credit of the government," he said. "But shareholders should be upset. Lewis entered several deals -- LaSalle, Countrywide, Merrill -- despite being on record saying no one should invest during the second half of 2008."
Lewis joined the company in 1969 when it was North Carolina National Bank, operating solely in that state. By the time he became CEO, the bank was the third largest in the country, with branches in 20 states and 190 countries, thanks in part to his plan, which stressed opening branches rather than acquiring outside companies.
His supporters credit him with keeping the bank liquid and are confident he can steer the bank through the storm of the recession. Lewis has repeatedly said the bank would not need to be nationalized. At a speech to CEOs in Boston on Thursday, Lewis called nationalization a "nightmare" and said he strongly agreed with SEC Chairman Ben Bernanke that "nationalization is not necessary to stabilize the banking system."
But some shareholders are wary of Lewis' bullish comments on the economy's health and accuse him of lying to Congress and shareholders about the Merrill deal. They are particularly angry about the last-minute payout of $3.6 billion in bonuses to Merrill executives.
Those investors, including a group that represents the Teamsters and six other labor unions, accuse Lewis of abrogating his fiduciary responsibility and want to see him fired.
They have lambasted Lewis for making unwise investments and accuse him of lying to shareholders and displaying the worst in corporate excess. Last week, Lewis arrived in New York aboard a $50 million corporate jet to answer questions from Attorney General Andrew Cuomo about the $3.6 billion in bonuses Merrill Lynch gave its executives just before Bank of America acquired the company.
Change to Win Investment Group manages 33 million Bank of America shares, or about one half of one percent of the bank's stock, for the Teamsters, the Service Employees International Union and other trade groups.
CEO Ken Lewis Says He's Not Going Anywhere
In a letter last week to the bank's lead director, O. Temple Sloan, Change to Win called on the bank's board to "immediately seek the resignation of chairman and CEO Ken Lewis."
"Lewis has made disastrous decisions in the past five months," Change to Win spokesman Rich Clayton told ABC News.com.
The investment group holds Lewis responsible for allowing Merrill to pay the $3.6 billion in bonuses just before the deal was done, failing to disclose more than $20 billion in pre-tax losses and failing to protect shareholders from those losses.
"Lewis failed to put shareholders first and he failed to be honest," Clayton said.
Silvestri would not comment on Change to Win's request, but both Lewis and the bank's board of directors have previously said the CEO is not going anywhere -- at least for another two years.
Coming off one of the worst weeks on Wall Street, Lewis and other bank leaders have launched a public relations offensive to calm national fears about the economy.
In an interview with the Financial Times last week, Lewis acknowledged that asking the federal government for $20 billion to help pay for Merrill Lynch was a "tactical mistake" because it made the bank appear weak.
In the March 2 interview, Lewis gave his first hint of when he might leave the company, vowing to stay on as CEO until the bank paid back the $45 billion in taxpayer aid it received through the Treasury department. He estimated that it would take two to three years.
Miller, the analyst, doubted Lewis would last that long
"I don't think they'll pay back the government in two years," he said. "I think it will be difficult for him to stick around."
In January, Sloan, the bank's lead director, reiterated the board's support for Lewis.
"The board today during [its] regular meeting expressed support for Ken Lewis and the management team, noting their experience in managing through challenging environments and in assimilating mergers," he said.
At the time, Sloan also told the Wall Street Journal that the question of Lewis' job security "is not expected to be reopened."
Lewis, however, has made a point to let shareholders and the government know that the bank is not Citigroup, which nows counts taxpayers as the single largest shareholder after a government bailout.
'No One Had a Gun to His Head'
Last month, he told Congress that Bank of America's core "business is strong." In a memo to employees written in February, he said the bank would no longer need government assistance and that "our company has more than enough capital, liquidity and earnings power to make it through this downturn on our own from here on out."
Lewis' supporters echoed that sentiment to ABC News.com.
"The bank has got tons of liquidity and a huge branch network with loyal depositors," said a derivatives banker who requested anonymity because of a professional relationship with Lewis. "It can ride out any temporary downturn in value of assets, even if it lasts a couple of years."
The banker said Lewis' bullish statements could be reconciled with the declining stock price because despite the bad mortgages it took on when it acquired Countrywide -- once the country's largest mortgage lender -- the bank still had people walking into its branches every day and depositing money.
"People can still go to Bank of America, rather than lining up outside Countrywide and trying to get their money," the banker said. "Lewis took a bullet for a lot of other creditors. Shareholders might not be very happy but society owes him a debt."
Lewis, he said, could not be blamed for Merrill's paying its employees bonuses before he had control of the company.
But Lewis' detractors say the bank chief has to accept responsibility for the bank's current situation, and that its ability to survive the recession is not reason enough to keep him at the helm of the company after he has caused so much damage, said Ellman, the former Merrill Lynch employee.
Lewis, Ellman said, was "dumb enough" to buy Merrill and agree to the bonus payout without doing adequate due diligence.
"If Bank of American goes down, he has to bear that responsibility. No one had a gun to his head."