Given Wells Fargo & Co.'s victory over Citigroup Inc. in the brief but nasty battle to acquire Wachovia Corp., one thing is clear: It is not a good idea to dis Dick Kovacevich.
In fact, it is entirely possible that the Wells Fargo chairman might be running Citi today if it were not for a bizarre incident that occurred 23 years ago, when he was passed over for the newly created job of worldwide retail banking czar at what was then Citicorp.
At a September 1985 press conference announcing a major reorganization of that company, John S. Reed, then the chairman and CEO, appointed Richard S. Braddock, then the head of its highly profitable domestic retail operations, to run its entire consumer banking business.
At the time Mr. Kovacevich headed the international retail unit, his just reward for having ramrodded automated teller machines into Citicorp's New York-area branches in the late 1970s. He later spearheaded its push into residential mortgage lending, which was then the nearly exclusive province of the thrift industry.
I was covering the press conference for The Wall Street Journal. When I asked Mr. Reed what would happen to Mr. Kovacevich, he replied, "We're scrounging around the bank for something for him to do."
Reporters' jaws dropped, including mine. John Maloney, a Citi spokesman, blanched. Mr. Kovacevich was not there, but he was devastated when he heard what Mr. Reed had said. The callous remark seemed intended to send a message that his future there was bleak at best.
Even though Mr. Reed tried to persuade him to stay, Mr. Kovacevich accepted a job in March 1986 as the president and chief operating officer at Norwest Corp. in Minneapolis.
As I recounted in my book, "Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy," Mr. Reed later told me, "Out of ignorance, it never really crossed my mind that he [Kovacevich] was going to be uptight about putting Braddock on the job that he wanted. … There was no question in my mind that he was going to be a major player" at Citicorp.
"I thought he knew that," Mr. Reed said. "I failed to understand that people can't tolerate being seen publicly not being in a cubbyhole. … Dick was one of the guys I really liked. I was really unhappy about that," he admitted sadly.
Five years later Citicorp was on the edge of the abyss, the victim of bad commercial real estate and leveraged buyout loans. Rumors were rampant that Mr. Reed himself would be replaced. In 1998, after nursing Citi back to health, he and Sanford I. Weill orchestrated the merger of Travelers Group and Citicorp to create Citigroup.
Less than two years later, in a well-publicized boardroom coup, Mr. Reed was deposed by Mr. Weill. Under Mr. Weill's successor, Charles O. Prince 3rd, a lawyer with little-hands on banking or management experience, Citigroup was nearly crippled by betting heavily on securities and other instruments linked to subprime mortgages. This was the fourth time since the 1920s that the company was brought to its knees by bum real estate investments.
While Citi crashed and nearly burned (twice), Mr. Kovacevich quietly built Norwest into a Midwest banking powerhouse by acquiring small banks and expanding product offerings. The strategy culminated in 1998, when Norwest bought the old Wells Fargo.
Though currently Wells is one of the nation's largest mortgage lenders, it has emerged relatively unscathed from the subprime rubble to become one of the handful of large, healthy U.S. financial institutions. And Mr. Kovacevich, who will reach Wells' mandatory retirement age of 65 on Oct. 30, has emerged as one of the few remaining wise men in the top tier of American banking.