Bank boss Lewis told to hand back 2009 salary

While Goldman Sachs bankers were toasting the news that their 2009 bonus pool had reached $16.7bn, one of the American financial sector's former heavyweights had less good news. Ken Lewis, Bank of America's outgoing chief executive, has been ordered by Kenneth Feinberg, the US federal pay czar, to give back $1m he has received so far this year in salary. Furthermore, he will forego the rest of his $1.5m annual salary and will not be entitled to any bonus.

Lewis (above) has apparently decided to write out the $1m cheque and not complain. "Lewis felt that it was not in the best interest of Bank of America to get involved in a dispute with the pay master," a Bank of America spokesman said.

Lewis, who was one of Time magazine's 100 Most Influential People in 2007 and named Banker of the Year in 2008, has fallen very quickly from grace. At the height of the economic crisis, he was accused of misleading his shareholders about Bank of America's acquisition of Merrill Lynch over Merrill's executive bonus pool and the extent of the losses they had in the mortgage market. This confusion led shareholders to vote to deprive Lewis of his title of chairman, which he had held since 2001. Earlier this month, Lewis announced he would retire at the end of the year.

Having earned an estimated $125 million in pension benefits during his 40 years at the bank, Feinberg's decision that he will lose his salary and bonus this year will not have too great an effect on Lewis's personal predicament, but it has been greeted warily by the financial community.

Greg Donaldson, chairman of an Indiana-based capital management firm, told Bloomberg: "It's punitive and it's mean-spirited, and it's an attitude that will send shivers through every person who does business with the government or is regulated by the government."

Kenneth Feinberg, who previously headed the September 11 Victim Fund, was appointed by the Obama administration to rule on how much those executives whose corporations were bailed-out by the US Treasury should receive in terms of pay and bonuses. Along with Bank of America, which needed $45 billion in government funding, the list of corporations affected includes Wells Fargo, General Motors, Chrysler and Chrysler Financial.