Krawcheck Down at BofA

I'm not a finance specialist, so I didn't know who Sallie Krawcheck was until today.  According to her online resume, she has had a fairly storied career given that she is only 46.  Until this week she held the position of Chief Executive Officer at Merrill Lynch.  Previously, she was formerly CFO at CitiCorp and Chairman and CEO of Citi's Global Wealth Management.

In an article on her and BofA in the NY Times Dealbook, it states that Ms. Krawcheck distinguished herself early in her career

as a stock analyst, covering securities companies. Early on, she made headlines with some of her bold calls, notably upsetting Wall Street executive Sanford I. Weill when she criticized the acquisition of Salomon by his firm the Travelers Group. Shortly after Alliance Capital Management purchased Bernstein in 2000, she was named chairman and chief executive.

My first thought, was how does someone at that age usurp so many people within the dog-eat-dog world of  finance to achieve so many senior positions at such an early age?  What happened to all the people who were in their 50's and 60's at the time she received her postings, who had been working in the industry before her?  The situation leads me to ask, what is it that these people are doing that is so valuable in these executive suites?  According to published articles on her, she was profiled in Fortune magazine titled, "Looking for the last honest analyst."  Krawcheck was brought into Citigroup in 2002 when its former chief Sandy Weill wanted to clean up the reputation of its tarnished Salomon Smith Barney division.  As Citigroup's CFO she used to work just down the hall from the company's former CEO Charles Prince, who was forced to resign his position at the end of 2007 as the credit crisis from the housing market emerged.  In an article in Fortune magazine in 2006, a year prior to the start of the Great Recession, she said, "The consumer doesn't seem stretched. I wouldn't bet against U.S. consumers. They're pretty rational folks."  That statement as we know today, four years into the Great Recession, is just rubbish.

Maybe this line of thought isn't germane to the actual point of  this post, but the personality based politics of  these financial firms strikes me as odd.

The point of this post is that Bank of America after hiring Krawcheck just two years ago has decided to terminate her.  Zerohedge blogger is calling her the first sacrificial lamb to be used by Bank of America in its attempt to re-organize its top management.  Consider this section of the NY Times article on the restructuring:

Since her arrival, the wealth management group has posted steady results, even as the broader market has been battered by billions of dollars in losses. In the second quarter, the division earned $506 million, down slightly from the previous period, but up from $329 million in the second quarter of 2010.
In particular, the Merrill Lynch brokerage force has been a surprising bright spot for the troubled bank, increasing its client base since the 2009 takeover by Bank of America.

Does firing the the head of one of the few divisions that does make money for the organization make sense to you?  I suppose it does if one assumes that Merrill's wealth management division no longer operates for the primary benefit of its clients, but for the shareholders of Bank of America instead.  Felix Salmon thinks:

that wealth management at BofA, then, is going to act a bit like dialup revenues at AOL: a steady and dependable revenue stream, in long-term secular decline, which can be used to fund investments in the rest of the business.

Whatever is going on at BofA suggests that this overstuffed Frankenstein operation is heading for even more serious problems than is currently being discussed publicly.  More than just management changes need to be imposed on this To-big-to-fail loser.  The entire beast needs to be cut up and sanitized for the good of the global economy.