A Cry for ‘Ears of the Bull’ Ends Job With BofA : Armacost’s Meteoric Career Traced

Even at the end, Samuel H. Armacost refused to accept responsibility for BankAmerica’s ever-worsening financial slide during his 5 1/2 years as chief executive of the corporation and of its Bank of America subsidiary.

Instead, in stepping aside Friday, the 47-year-old one-time boy wonder who rose swiftly through the ranks of BankAmerica blamed “external perceptions,” “rumor” and “speculation” for the crisis of confidence that forced his departure.

“Sam feels strongly that he has done all the right things,” said Peter Armacost, the brother and confidant of Samuel. Peter Armacost, the president of Eckerd College in Florida, said his brother “feels that he has put a good strategic plan in place and is disappointed that the board was not of a mind to ride things out a bit longer.”

“His successor,” Peter Armacost predicted, “is going to look pretty good a year from now.”

Sam Armacost’s attitude--he said in a Times interview two months ago, “I am not about to do any great mea culpa”-- is best understood in the context of a career characterized by rapid advancement and, at least until he assumed the top job at BankAmerica in 1981, few setbacks.

Steadily Upward

He joined the bank upon graduation from Ohio’s Denison University in 1961 and, except for the time he took to earn a master’s degree in business administration at Stanford, spent the next 20 years bounding steadily upward. Besides holding jobs in various California branches of the bank and at corporate headquarters, he did three stints in London, one in Chicago and another in Washington.

“He was clearly a meteor in his rise, and he never stayed one place long enough for anyone to judge his abilities or to pick up the wisdom he needed for the top job,” said one analyst who closely tracks BankAmerica.

All the while, the charismatic executive honed the political skills that allowed him to cultivate members of BankAmerica’s board of directors and to retain their support--until now.

“The pressure on the board became too great,” one well-placed source said. “When the crowds are crying for the ears of the bull, sometimes you have to cut them off.”

In recent months, investment bankers--including John H. Gutfreund, chairman and chief executive of Salomon Bros., BankAmerica’s investment banker--have joined the chorus of securities analysts and other critics calling for Armacost’s ouster.

In retrospect, it is clear that Armacost’s rapid rise was no guarantee of success in the rough-and-tumble world of financial deregulation. The institution at which Armacost stood out in the 1960s and ‘70s entered the ‘80s ill-prepared to meet the rigors of no-holds-barred competition. Its bureaucracy was bloated, its costs were out of line and its computer systems were outmoded.

Costly Albatross

In addition, its sprawling California branch system, once a source of strength when interest rates paid to savers were low and regulated, became a costly brick-and-mortar albatross when interest rates soared under deregulation.

The bank’s paternalistic corporate culture, established by founder A. P. Giannini, fostered employee loyalty but paralyzed the bank when conditions changed and trimming the payroll became imperative.

Although Armacost spoke often of the need to change the corporate culture, many observers inside and outside the bank say he did not have the stomach to hold subordinates responsible for their lending mistakes or to order needed layoffs. Indeed, recent staff cuts have been orchestrated by Thomas A. Cooper, who was named president and chief operating officer of the bank--but not of the holding company--in March.

Thus, say Armacost’s critics and friends alike, his shortcomings were failures of training and temperament, rather than of character.

“Quite honestly, I don’t know how you train anybody to be head of a $120-billion organization,” said David Reese, a friend of Armacost’s from their days together at Denison’s Beta Theta Pi fraternity and now president of State Savings Mortgage Co. in Phoenix, in a telephone interview Friday.

The task of training a chief executive to oversee 80,000 employees in 101 countries was made even more difficult for BankAmerica because of its headlong rush into overseas and domestic corporate lending during the 1960s and ‘70s.

“Everybody in that corporate culture started out in the California retail branch system. When they moved into new arenas, they got their brains bashed in,” Reese said. “They went overseas later than Citibank, Chase and Morgan, and they made the loans that the other guys didn’t want to make.”

It was Armacost who got stuck with those loans when they soured. And, by trying to grow the bank out of its problems, it was Armacost who set the policies that led the bank to make hundreds of millions of dollars in additional loans that later soured, primarily in commercial real estate.

Armacost, critics say, also failed to install an effective credit monitoring system and, as a result, there were repeated end-of-quarter “surprises,” most recently in this year’s second quarter when BankAmerica posted a stunning $640-million loss. It was after that third--and largest--such quarterly earnings debacle within the space of a year that board members became convinced that a management change was needed.

Key Acquisitions

To his credit, Armacost made several key acquisitions during his tenure, including those of discount broker Charles Schwab & Co. and Washington state banking leader Seafirst Corp.

Armacost’s departure closes a chapter in one of the longest-running soap operas in U.S. business history, though the drama surrounding the bank will likely continue. Problem loans of $4.4 billion will not go away with Armacost, First Interstate Bancorp of Los Angeles still wants to buy BankAmerica, customers are restive and employee morale is low.

Still, Armacost’s exit will end an almost unprecedented public debate concerning the leadership of California’s largest bank.

Armacost-bashing became so common in the San Francisco area press in the last few years that the banker would meet regularly to commiserate with another frequent target, his friend Bob Lurie, owner of the San Francisco Giants.

But the baseball team “had a pretty good season this year, and our press got better,” Lurie said Friday. “Unfortunately for Sam, things at the bank just got worse.”

Still, despite the drumbeat of criticism, Armacost until now has survived crisis after crisis, leading some observers to dub him “the Teflon banker.” But as one BankAmerica officer said Friday: “Teflon wears off and sometimes the heat gets so intense that it burns up.”