Bank of America Corp., stressing its intent to change the culture at Countrywide Financial Corp. after acquiring it, said Wednesday that -- on second thought -- it wouldn't keep on the mortgage lender's No. 2 executive to run the companies' combined home-loan operations.
When it agreed in January to buy the struggling lender, Bank of America said Countrywide President David Sambol, the lender's top executive after founder and Chairman Angelo Mozilo, would stay on to run the combined companies' mortgage operations. Now that role will go instead to longtime BofA executive Barbara J. Desoer, who currently is chief technology and operations officer. She is also a member of the company's management operating committee.
The announcement underscored Bank of America's oft-repeated insistence that it would complete its acquisition of the nation's largest home-loan company for stock currently valued at $3.6 billion. Countrywide stock surged 8.5% on the news, but its price still reflected significant doubt on Wall Street that the deal would go through.
As a consequence of Bank of America's temporary attachment to Sambol, he will get $8 million in restricted stock in addition to $20 million in cash. Had BofA not acted to retain him, he would have received only $20 million.
Critics have complained that aggressive lending practices at Calabasas-based Countrywide contributed to the worst downturn in the housing and mortgage markets since the Great Depression, and they have singled out large pay packages awarded to Mozilo, Sambol and others as inappropriate given the company's near-collapse.
Among the critics was U.S. Sen. Charles E. Schumer (D-N.Y.), chairman of Congress' Joint Economic Committee, who had asked Bank of America to reconsider the decision to put Sambol in charge of home lending.
In a statement Wednesday, Schumer said Ken Lewis, chief executive of Charlotte, N.C.-based Bank of America, had "done the right thing" in cutting Sambol out of BofA's future.
"Countrywide did more to contribute to the sub-prime mortgage crisis than anyone else," Schumer said. "It always amazed me that Bank of America, which has a fine reputation, would want to keep someone who was in effect Countrywide's chief cook and bottle washer on the scene."
Lewis reiterated Wednesday the company's plan to replace Countrywide's approach to home lending, which racked up billions of dollars in losses on risky mortgages, with a more conservative approach.
"Current economic and business conditions have highlighted the need for strong and focused executive leadership with a deep understanding of the Bank of America culture and operating model," Lewis said in a statement.
Bank of America spokesman Robert Stickler said it was important to Lewis to have "someone deeply immersed in our culture" heading the mortgage operation "effective the day of the transaction."
Stuart Plesser, bank analyst at Standard & Poor's Equity Research, said letting Sambol go was an attempt by Bank of America to "disassociate itself from the Countrywide brand."
Bank of America initially had said it would consider retaining the Countrywide name but more recently has indicated it would drop it and put all of its mortgage operations under the Bank of America brand.
Countrywide's financial condition has deteriorated since January, with the company posting an $893-million loss for the first quarter of this year after a loss of $1.6 billion in the second half of 2007.
On a down day for financial stocks in general, Bank of America shares fell 30 cents Wednesday to a five-year low of $33.87, giving the acquisition a value of $6.17 for each Countrywide share.
But Countrywide shares remained 19% below that figure after jumping 39 cents Wednesday to $4.98.
That discount, reflecting doubt that Bank of America will proceed with the transaction, narrowed from 26% on Tuesday. It has fluctuated from 7% to as much as 38% since the deal was announced.
A potential legal obstacle to the combination was cleared Wednesday when lawyers said Countrywide had agreed to settle three shareholder lawsuits challenging the sale of the company.
Lewis has said the deal is important because it would make his bank the largest player in all three key aspects of consumer banking -- credit cards, deposits and mortgages -- giving it an unparalleled opportunity to sell financial services to individuals and small businesses.
As the head of one of those three segments, Desoer would report directly to Lewis.
Desoer, 55, has roots in California, having been a retail banking executive for San Francisco-based BankAmerica Corp. before it was acquired by NationsBank Corp. in 1998 in the transaction that created the current Bank of America. She will move from North Carolina to run the mortgage business from Calabasas, the company said.
Sambol, 48, was among several Countrywide executives who were awarded hefty bonuses to stay on after the Bank of America acquisition, which is set to close early in the third quarter.
Under an agreement with Countrywide, he was entitled to receive about $20 million if he was let go after a takeover. In March, Bank of America agreed to give him that amount plus $8 million in restricted stock if he would stay.
Sambol's retention package had also extended his fringe benefits at Countrywide, including "use of a company-provided car or car allowance, country club dues and financial consulting services" through the end of 2009, according to a regulatory filing.
He also was to continue to have access to a company-provided plane for business and personal travel, although the filing says "the number of hours available for personal use would be limited."
Sambol now will get some but not all of those perks, BofA spokesman Stickler said, declining to elaborate.
Sambol couldn't be reached for comment.
Expanding on another front, Bank of America said Tuesday that it would pay $1.9 billion to increase its stake in China Construction Bank Corp., the second-largest bank in China, to 10.8% from 8.2%.