Praised, Then Ousted

Some of the nation's most prominent bankers have been forced to eat their words early in what is expected to be another painful year as they attempt to deflect blame in the face of mounting losses.

Some of the nation's most prominent bankers have been forced to eat their words early in what is expected to be another painful year as they attempt to deflect blame in the face of mounting losses.

Management teams at Bank of America and Citigroup have openly supported top leaders under public scrutiny, but observers say the companies ultimately bowed to pressure from both the government and disgruntled shareholders.

With many other firms struggling, more turmoil is likely in executive suites.

"Regardless of the company line, you're only going to see more board resignations, more turnover in top management," Joseph Battipaglia, the chief investment officer at Stifel Financial Corp.'s Ryan Beck & Co., said in an interview Friday. "The fact is, after investing so much taxpayer money into these big banks, the government has perhaps the most important say, and the government is rightly suspicious of all of these individuals. And, of course, shareholders want justice; they don't want more of the same."

Kenneth Lewis, BofA's chief executive, continued to endorse John Thain as recently as Jan. 16, touting the former Merrill Lynch chief's new role as the head of the Charlotte company's investment banking operations.

"We are happy that John Thain has assumed a major role at Bank of America," Lewis told analysts that day on a conference call, in which BofA also discussed its need for a government bailout to shore up huge losses at Merrill. "John is in charge of global corporate investment banking, as well as global wealth and investment management, both of which will incorporate most of Merrill's businesses."

Six days later, after absorbing the news of Merrill's $15 billion fourth-quarter loss, Lewis, 61, ousted the 53-year-old Thain, saying simply in a press release that he had left the company and had been replaced by Brian Moynihan.

BofA did not return calls.

Similarly, Citi continued to endorse Sir Win Bischoff in the weeks before he retired abruptly last week as its non-executive chairman. The Wall Street Journal first reported in November that several directors were dissatisfied with Bischoff's oversight of the New York company and were trying to galvanize its leadership to force him out.

Citi stuck to that line for some time; a high-ranking insider told American Banker, a sister publication to MAR, this month that the company's top executives supported Bischoff, 66, who became the acting CEO in November 2007 after Charles Prince's ouster.

After Vikram Pandit was hired as the CEO in December of that year, Bischoff became the board chairman.

Then last week, after it announced its fifth straight quarterly loss-a fourth-quarter hemorrhage of $8 billion-and a plan to dramatically downsize by dividing itself in two, Citi named its lead director, Richard Parsons, 60, as chairman.

Parsons, the former CEO of Time Warner Inc., signaled in a press release that more change was on the way, saying he "will work to reconstitute the board as directors retire with new members who bring strong, proven business judgment and financial and banking sector expertise."

Citi would not elaborate Friday. Observers said several board members likely will step down before the company's annual meeting in April, and some wondered if the next head to roll on the management side would be Pandit's.

"He was dealt a really bad hand to begin with," and "I'm not sure it would be fair to lay to the blame at Pandit's feet," Lawrence White, a professor at New York University's Stern School of Business, said in an interview Friday.

"But it wouldn't surprise me if shareholders viewed it otherwise and made that known to the board ... And if it happens that even more federal aid must be shoveled in Citi's direction, then Pandit may have to go, if only as a symbolic move to show that a major change is finally taking place."

The thinking is that Pandit no longer has a counterpart on the board to shoulder the blame for Citi's ongoing dismal performance and its need last year to turn to the federal government for a $45 billion bailout.

A Citi spokesman would only say Friday, "We're not commenting on any rumors or speculation."