The end is near, says Ken Lewis, chairman and CEO of Bank of America. No, not the end of the world—the end of the U.S. recession. Last week, Lewis shared insights on the economy from his unique perspective as leader of the largest bank in the nation with students at Texas A&M University’s Mays Business School.
Bank of America chairman and CEO Ken Lewis hosted a Q&A session with Mays MBA students (seen here), as well as a meeting with a group of Business Honors students.
Lewis was on campus filming an interview with CNBC’s Squawk Box program, after which he made two appearances at Mays Business School, meeting with a group of Business Honors undergraduates and hosting a Q&A session with MBA students.
During his television interview, Lewis commented that he believes the U.S. economy is headed for a turnaround by the end of this year. “You can’t throw as many things as we’re throwing at [the financial crisis] and not break the back of this thing,” he said, mentioning that the beneficial refinancing options available are enabling many Americans with loans to have more money in their pockets each month. Lewis reported that BofA is seeing an unprecedented number of loan refinancing applications currently, totaling $5 billion per day.
Despite the turmoil in the banking industry, Lewis reported that his bank is still doing well and making a profit, albeit a smaller one than in years past. Last year, BofA made $4 billion after taxes. When compared to the many banks that closed their doors in 2008, that is a significant number. He predicts that in two years, BofA will be extremely profitable once again.
Lewis was asked about the $45 billion in TARP money that his bank has taken on, which he believes was more than what they needed to weather the storm. Bank of America is committed to repaying the loan as quickly as is responsible, says Lewis, reporting that they just made the first $400 million payment a few weeks ago. He doesn’t regret having used a portion of the TARP funds to purchase Merrill Lynch in January 2009, though many have criticized this action. The acquisition of Merrill Lynch and mortgage lender Countrywide Financial “will prove to be two of the best acquisitions we’ve ever made, if you judge us over two or three years rather than two or three months,” said Lewis.
Earlier in the morning, Lewis was interviewed on CNBC’s Squawk Box by co-anchor Becky Quick at the George Bush Presidential Library and Museum.
Is the U.S. government doing the right thing to bring us out of the recession, students asked. “We could argue about components of the stimulus program,” said Lewis, but basically he does agree with the government’s response, saying that a more laissez faire approach would not have worked in this situation, but rather would have led to more unemployment and a downward spiral of despair.
Students quizzed Lewis about executive compensation, asking how a bank can retain its top people if the government prevents the bank from paying a competitive salary. Lewis acknowledged how difficult it will be to retain top talent when compensation is capped at American-owned banks, but not at foreign-owned banks in the U.S. such as UBS. However, he does believe that the compensation system needs to be restructured, with an increase in base salaries and a decrease in bonus pay so that there is less incentive for executives to engage in risky practices in the hopes of reaping large bonuses.
Lewis has held the position of chairman and CEO at BofA since 2001. He joined the company in 1969 (at that time NationsBank), and has served as the head of both international and domestic operations during his years with the organization. He is widely respected in his field and has been recognized twice by US Banker as Banker of the Year. In 2007, Lewis was listed among Time Magazine’s “Most Influential People.”
About Mays Business School
Mays Business School currently enrolls more than 4,000 undergraduate students and 875 graduate students. The full-time MBA program is highly selective, with an acceptance rate of 26 percent. Currently there are 159 MBA students in their intensive 16-month program.
(Some information taken from CNBC’s transcript for Lewis’s April 2, 2009 appearance on Squawk Box, found at http://www.cnbc.com/id/30011937.)
