A clear voice in policy debates, Mr. Lewis stood and made the convincing case last month when limits on executive compensation threatened the consensus behind the Treasury Department's plan to invest capital in financial firms. And it was Mr. Lewis who, under fire for his deals first for Countrywide and later for Merrill Lynch, never backed off his belief that each target had value, not merely as an opportunistic purchase, but also as a strategic one.
For these reasons and others, American Banker has named Mr. Lewis its 2008 Banker of the Year.
For many, the leader of the $1.83 trillion-asset Bank of America Corp. has become the face of U.S. banking. In October, when "60 Minutes" wanted to explain the government's rescue operation, it turned to Mr. Lewis.
"I never really thought about it one way or another," he said of his public profile. "It just became part of the territory as we truly became the Bank of America.
"I don't seek the attention, but there are times when we think it is necessary for me to make comments on certain policies," Mr. Lewis said in an interview.
The current year's honor is not his first. The editors of American Banker also named him the Banker of the Year in 2002, citing at the time his efforts to expand his company by acquisition while improving its retail and customer service capabilities.
Watching him today, his closest colleagues cannot help but recall the former introvert who had trouble with public speaking, even when dealing with employees.
J. Steele Alphin, the Charlotte company's chief administrative officer, who has known Mr. Lewis for more than 20 years, recalls serving under the up-and-coming executive in 1985 as he led the banking operations in Florida.
"He had an awkward time" talking to tellers, Mr. Alphin recalled. If someone asked a discomforting question, he "would sometimes lock in on you" with an intimidating stare.
Mr. Lewis became aware that he had to sharpen his communications skills. "He knew people needed clarity from him," Mr. Alphin said. "He painfully built those skills."
In the mid-1990s Mr. Lewis began recording himself, just speaking alone, and then sharing the tapes with Mr. Alphin to get his critique. "He'd sit there and count the pauses," he said. "He became more comfortable articulating things in his own way, and he became much better at listening to the associates."
Opportunistic under increasingly deteriorating conditions, Mr. Lewis has expanded on B of A's predominance in retail banking to grow in other areas as competitors have faltered. His company picked off Countrywide Financial Corp. in January to become the nation's biggest mortgage lender, and it landed Merrill Lynch & Co. Inc. in September to put it in the upper echelon of the investment banking and brokerage businesses.
Mr. Lewis says he does not want anyone to see him or his company as a white knight. Rather, this year's acquisitions fulfilled an ambitious wish list that was drafted soon after he became B of A's chairman and chief executive in 2001.
"We had a blank sheet of paper" and put on it a list of businesses ripe for growth and the companies it would have to acquire to gain the right scale, he said. "It's true when people say we did these deals so quickly, but we had identified those strategic opportunities long before."
In his own right, Mr. Lewis has picked up the mantle from his predecessor, Hugh McColl Jr., as an aggressive consolidator, adding to his previous reputation as a solid manager. Since being honored as the 2002 Banker of the Year, Mr. Lewis has overseen the purchases of FleetBoston Financial Corp. (to bulk up in retail banking in the Northeast), LaSalle Bank Corp. (to get scale in Chicago), U.S. Trust Co. (to expand in wealth management), and MBNA Corp. (to become a top credit card issuer).
Like his mentor, Mr. Lewis has demonstrated an innate competency for taking advantage of others' circumstances. He nabbed LaSalle last year while a battle was raging in Europe over its parent, ABN Amro Holding NV. Charles Schwab Corp. divested U.S. Trust after failing to capitalize on the unit.
In the case of Countrywide, a few months after B of A's $2 billion investment in August 2007, Angelo Mozilo, chairman and CEO of the Calabasas, Calif., mortgage lender at the time, called Mr. Lewis to pitch a deal for the entire company.
As housing prices continued to fall and Countrywide's losses piled up, many on Wall Street expected B of A to abandon the deal or at least try to reduce the price. Mr. Lewis stood pat and went to great lengths to justify the deal, the price, and his company's due diligence and expectations.
"You can miss" projections on a deal "by some reasonable amount and still have a very good financial transaction," he said during a June 2 conference call sponsored by Deutsche Bank Securities. "We tried very hard to look out and have a conservative view of the markets. We don't have our heads in the sand...On the other hand, we do not have this dismal view that it's going to continue forever, and that things go to zero."
B of A completed the deal in July. Along the way it announced plans to eliminate many of the controversial lending practices at Countrywide that had drawn intense scrutiny from activists and politicians. In October, B of A said it was on track to modify mortgages for about 400,000 former Countrywide borrowers. JPMorgan Chase & Co., in detailing its own modification plans in November, said the B of A program served as a "good benchmark" for its initiative.
The latest deal came on the heels of an aborted play for the collapsing Lehman Brothers and an early morning phone call Sept. 13 from John Thain, Merrill's chairman and CEO, who was concerned his firm would be the next to fall. He initially offered to sell a minority stake in the venerable New York investment bank, but Mr. Lewis rejected that idea. Instead, the two sides hastily hammered out a deal to sell Merrill in its entirety.
"We both saw the strategic fit right away … but I told him we don't like minority stakes," Mr. Lewis said, explaining his direct and hard-nosed approach to merger negotiations. "If there is something that is a nonstarter, you might as well get it out of the way. Some executives like to softly get there, but I like to say, 'Here's what we can and can't do.' People know our constraints, and it seems to work."
Creating growth had long been a benchmark for B of A and its predecessors, and it was something that drew Mr. Lewis to the company in 1969, even though he says he could have made more money elsewhere.
For years he served under Mr. McColl as the company built a coast-to-coast retail banking operation through a series acquisitions. When Mr. Lewis succeeded his mentor seven years ago, some wondered when he could emerge from Mr. McColl's shadow.
For Mr. McColl, that moment came in 2004 with the Fleet purchase. "He matured well," he said in an interview. "Look at how well he is handling himself in public these days. He has proven to be thoughtful and statesmanlike. It is very gratifying and pleasing to me."
In recent years Mr. Lewis has become a public face for the financial services industry. Many say it began with the company's efforts to change the law barring any banking company from controlling more then 10% of the nation's deposits.
These days he downplays the debate, insisting that B of A has no strategic need to eliminate the cap. Instead, he became an early backer of regulatory action to remove the logjam in credit markets and restore investor confidence in the financial system. Granted, his calls as recently as this summer were for a "measured" response, but he says the government decision in October to buy minority stakes in numerous financial services companies, including B of A, was strong but necessary.
Expanding on a recent comment that the golden era in banking is over, Mr. Lewis said in the interview that the industry is entering "a simpler time" when it comes to complex instruments, "and there will be much more public scrutiny in the form of regulation and supervision" as a result of the government bailouts and the $250 billion capital assistance plan.
"We have never seen a time like we're about to see in the industry," he said. "To think there is an easy fix would be in error."
When Treasury Secretary Henry Paulson called nine of the top financial services executives to New York to present them with offer sheets for the capital program, there was some initial resistance over the level of government intervention, as well as concern about limiting executive pay.
But Mr. Lewis, who gave up his employment agreement in 2003, was one of the executives who forcefully supported the plan and the potential strings that were attached.
"I told them, 'Let's get on with it,' " he said. "I think it was the right thing to do. It was something that was done around the fear of the unknown. Now you can get capital in the system and leverage it, and there are institutions, as we are clearly seeing, that need to be acquired."
On capping executive pay, he said: "I don't believe in contracts and golden parachutes. I don't have one. Why should the CEO have a safety net when no one else does? I welcome the no-contract era in banking."
B of A intends to "lend every penny that makes sense" from the $15 billion it received from the government. (Merrill received $10 billion from the capital assistance plan.) "You can now make loans because you have the money and can keep it on your balance sheet. As the economy comes out of this, there will be even more loan demand, and banks will be in an even better position."
Though he has vastly improved as a communicator, being in the spotlight is a continual learning process. Mr. Lewis still receives a mix of praise and criticism for his blunt commentary, dividing observers on whether he is candid or rash. In recent years, for instance, he has staunchly defended the resiliency of the U.S. consumer, only to have the nation pulled into what most economists agree is a consumer-led recession.
He admits that the consumer is under considerable pressure, but he still says retail banking is a "great bet" over the long term.
"I think we're positioned better than anybody in the world when things turn," he said. "We can talk about rising delinquencies, but most people are still paying their debt. There is a lot of deleveraging going on, and that is causing a lot of pain and is another reason why there is no quick fix."
Widening consumer cracks, and small-business issues that he called a "damn disaster," took a toll on B of A's third-quarter earnings, which fell nearly two thirds from a quarter earlier, to $1.18 billion. That drop, plus the fear of a prolonged recession, led the company to sell $10 billion of common stock and cut its dividend, something Mr. Lewis had hoped for months would not be necessary.
Earnings calls have sometimes invoked sharp comments from Mr. Lewis. "I've had all the fun I can stand in investment banking," he famously said in October last year, after a substandard third quarter and before a housecleaning in the unit.
"My style is more candid, so that people know where I stand at all times. It's just the way I am," he explained in the interview. In hindsight, however, he called the comment "reactionary" and one that taught him just how important his words can be.
"Cute comments always get you in trouble, and they always come back to haunt you," he said. "I wish I hadn't made that comment, because it caused clients to question our commitment to the business."
Don Powell, the former chairman of the Federal Deposit Insurance Corp., said that in some ways Mr. Lewis commands more respect because of those moments when he is willing to show emotion, rather than candy-coating events or making excuses.
"He's not timid," Mr. Powell said. "I think he would acknowledge that the ship was rocked, and things happened that he didn't think would happen. But he is also a steady rock and a competitor, which has served him well."
Colleagues say Mr. Lewis does understand the importance of subtlety.
Barbara Desoer, who oversees B of A's mortgage operations, recalled a meeting she was leading in California soon after NationsBank Corp. bought BankAmerica Corp. in 1998 to form what is now B of A. Ms. Desoer, a veteran of BankAmerica, was set to appear before 16 regional managers in a gathering that included Mr. Lewis.
"He came up to me, shook my hand, and we started walking to go in," she said. "As I was briefing him, he put his arm on my shoulder. It was a sense of being part of the team. Afterwards a number of people said, 'You're good, because we saw Ken Lewis put his arm around you as you walked through the door.' He has the capacity to be tough as nails … yet have that human, personal approach."
Mr. Lewis, 61, has given no indication of any plans to retire, and he is showing no lack of passion or signs of wear and tear from the volatile operating environment. In many ways, he carries himself as an executive who has accomplished everything on his to-do list but still wants his company to realize its potential.
"The whole focus now is getting through this cycle and trying to distinguish ourselves in a tough environment," he said. "The big focus is getting on the other side of the economy and these acquisitions, so we can reach our full potential. And that will take two to three years."
Mr. Lewis is sticking by a comment he made on a September conference call announcing the Merrill deal: The $50 billion transaction is likely his last major one.
"Everything that was on that sheet of paper from seven years ago has been realized," he said. "I will leave it to someone else to take out the next blank sheet of paper and fill it out again."
