Bank of America is looking for a new CEO. There are reportedly two committees at work, one seeking a highly qualified CEO to start in January, the other to pick an “emergency” CEO in case Ken Lewis’s legal troubles catch up with him before his scheduled retirement in December. All the candidates that have been mentioned so far have proved controversial. Stockholders and industry observers have complained that some have awkward backgrounds, while others are too unfamiliar with the workings of a bank like Bank of America. The “emergency” CEO, if one is needed, would presumably be an insider, a current Bank of America executive who is thought to be untouched by the bank’s legal difficulties. The bank appears to be leaning toward an outsider for the replacement CEO, who might be characterized as interim or permanent, but who should probably not expect a long tenure in either case. If it is true that the bank intends to select an outside candidate for CEO, it is probably a sign that the bank does not think it has the resources to survive the tough financial conditions of the next few years without substantial help from outside.
The FDIC said it had eight bidders for the assets of Corus Bank, which failed a month ago, and the winner in the auction was a group led by Starwood Capital Group. That deal is expected to close as early as next week, with the FDIC retaining a 60 percent share in the loan portfolio, a portfolio that features condo development loans. Real estate observers expect Starwood to undertake a flurry of foreclosures on failed condo projects. The result of that could be to flood the market in several cities with condo units at significantly lower prices, forcing other condo developers to also lower their prices, almost certainly leading some of these other condo projects to fail.
There were no bank closings tonight, leading me to wonder whether the FDIC’s cash flow situation is more dire than it appears on the surface. The number of banks in financial distress only increases week by week, so the gap in bank closings is the result of administrative forces. Besides the obvious cash flow concerns, delays also result as the FDIC’s limited staff is stretched thin by the growing number of problem banks. Computer system maintenance at FDIC scheduled for this holiday weekend may also be part of the reason why the FDIC was not in action tonight.