Bank of America Stocks Board With Ex-Regulators, Former Bankers

June 6 (Bloomberg) -- Bank of America Corp. named two ex- regulators and two former bankers as directors, remaking the board five weeks after shareholders ousted Chief Executive Officer Kenneth Lewis as chairman.

The bank, recipient of a $45 billion government infusion, is revamping a board that lost two other members in the past two weeks. Among them was lead director O. Temple Sloan, who had defended Lewis against attempts to force him out for failing to disclose mounting losses at Merrill Lynch & Co. before the lender took it over this year.

The new directors, among them ex-Federal Reserve Board Governor Susan Bies and Donald Powell, former chairman of the Federal Deposit Insurance Corp., inherit a lender that faces the biggest capital gap among 19 companies scrutinized in federal stress tests. This week, it replaced Chief Risk Officer Amy Woods Brinkley with Gregory L. Curl, a three-decade bank veteran who helped Lewis arrange acquisitions including Countrywide Financial Corp.

“As chairman, Lewis has really selected the board members that he wanted,” said Gary Townsend, president of Hill-Townsend Capital, a hedge fund in Chevy Chase, Maryland. The board changes and Brinkley’s exit are “an indication that the level of his control is reduced,” he said.

Bies, 62, and Powell, 67, are joined on the board by William Boardman, 67, a retired executive of Bank One Corp. and Visa International Inc.; and D. Paul Jones, 66, who was CEO of Compass Bancshares Inc., Charlotte, North Carolina-based Bank of America said in a statement yesterday.

Stress Test

Bank of America had a $33.9 billion capital shortfall that could lead to loan losses for 2009 and 2010 of $136.6 billion, or 10 percent of total loans, according to the stress test. Regulators said they might press banks for management changes when the tests were done.

“You are going to have some real board meetings at Bank of America now, and this is no longer a good-old-boy, friend-of- Ken-Lewis board,” said Anthony Polini, an analyst at Raymond James & Associates Inc. “Now you’ve got some independent thinkers and industry experts. This is an incredible move for the company.”

Regulators urged Bank of America to recruit new board members with risk management and financial services expertise, Polini said. “I don’t think they gave them these specific names,” he said.

Bank of America Chairman Walter E. Massey promised to reconstitute the board in April after stockholders voted to oust Lewis as chairman and said he would consider directors with financial service backgrounds.

Southern U.S.

Three of the four bankers have experience working with lenders in the Southern United States. Bies was an executive vice president at First Tennessee National Corp. Powell was chief executive officer at First National Bank of Amarillo, Texas. Jones led Compass before its sale to Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender.

“These new directors bring a wealth of experience in financial services from a variety of perspectives,” Massey said in the statement. “Their participation will make our board even stronger.”

Massey would not be available for further comment, bank spokeswoman Eloise Hale said.

Lewis is scheduled to appear at a congressional hearing next week to testify about the purchase of Merrill Lynch and the bank’s need for federal assistance.

Questions

The House Oversight and Government Reform Committee posed seven questions about the purchase, including when Bank of America executives knew about deteriorating conditions at the New York brokerage and any role federal officials played in the decision to complete the deal.

New York Attorney General Andrew Cuomo revealed in April that Lewis had testified then-Treasury Secretary Henry Paulson may have threatened to remove the bank’s management and directors in December if the lender tried to back out of buying Merrill Lynch.

“I suspect the board wants to improve its regulatory relationships and believes having a couple of ex-regulators on the board will help in that process,” former FDIC Chairman William Isaac said.

Citigroup Inc. reached an agreement with the U.S. Treasury Department in February to alter its board so that the majority is comprised of independent directors. The agreement was part of the government’s plan to convert preferred shares into common stock to strengthen the bank.

Leaving Board

Chairman Winfried Bischoff and three other board members, including former Treasury Secretary Robert Rubin, announced in January they would be stepping down from New York-based Citigroup’s board. Four outside directors replaced them.

Bank of America’s new directors reflect the challenge of overseeing the bank while managing government influence, said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta.

“This would send a message: all four have banking experience,” Eisenbeis said. “Dealing with the regulators will be a key issue going forward. The deep government involvement in financial institutions is going to have to be unwound. In the meantime, they are going to have to deal with the regulators.”