As Bank of America Corp. (BAC) moves forward with its plans to downsize operations from the management era of former CEO Kenneth D. Lewis, the bank’s distinction as the largest lender by assets in the United States is likely to go by the wayside according to a recent Bloomberg article. Current Chief Executive Officer Brian T. Moynihan intends to proceed with “Project New BAC,” which entails eliminating tens of thousands of jobs that could potentially spell the end for BAC’s grip on first place in assets, jobs and mortgage servicing.

A former executive at Fleet Financial Group, Moynihan has assembled a task force of more than 40 internal bank managers along with groups of consultants from two companies to cut 30,000 jobs as part of a $10 billion effort to cut costs. In an interview earlier this week, Moynihan outlined his plan to make Bank of America Corp., based in North Carolina, a more focused and easier to manage bank.

Former Federal Reserve economist and current DePaul University finance professor Rebel Cole has positive things to say about Project New BAC, stating, “What kind of stupid business plan is it to be the biggest? I’d much rather be profitable. They (BAC) wanted to be the biggest and show they could beat Wall Street at its own game, and they did it until [former CEO] Lewis let his ego destroy the company.”

Shareholder Sentiment

Former Bank of America Corp. CEO Kenneth Lewis headed up the bank from 2001 until the end of 2009, and in the process made it a behemoth among its peers. Now 64, Lewis acquired industry leaders MBNA Corp., a credit card vendor, and mortgage lender Countrywide Financial Corp., as well as adding securities firm Merrill Lynch & Co. The MBNA Corp. and Countrywide Financial Corp. acquisitions are said to have led to losses of approximately $50 billion, while some claim that the Merrill Lynch purchase caused extremely negative shareholder sentiment leading up to Lewis’ exit.

Regulators familiar with the bank state that officials at the Fed are keen on Moynihan’s intentions to reduce the size of the company and sell assets. Poplar Forest Capital founder J. Dale Harvey says that Moynihan’s sales have impressed him, and that he believes the current CEO’s decision to cut costs and reduce the bank’s size is correct. Harvey added, “He (Moynihan) is focusing on the long-term franchise businesses and getting rid of assets that don’t fit. The unfortunately reality is he’s had to spend the bulk of his time cleaning up messes made by his predecessor.”

Bank of America shares have fallen nearly 50% year-over-year as investors remain wary of costs related to the 2008 purchase of Countrywide and the possibility that Bank of America may issue new stock to boost capital. Upon buying Countrywide, Bank of America became the largest home lender in the United States. However, it lost that to Wells Fargo & Co. (WFC) and also fell behind JPMorgan Chase & Co. (JPM) in deposits earlier this year. As of the beginning of July, Bank of America still holds the distinction as the leader in assets with $2.26 trillion, while JPMorgan is a very close second with $2.25 trillion in assets.

Largest Employer

As of mid-2011, Bank of America employed approximately 288,000 people, which places it in first place ahead of Wells Fargo and Citigroup, which have around 260,000 employees. JPMorgan, recognized currently as the most profitable United States bank is listed at having close to 250,000 people on its payroll. Records show that toward the end of 2008, Bank of America had shed its employee base to 243,000.

Shrinking Banks

To date, Brian T. Moynihan has sold around $40 billion in assets along with a $5 billion preferred share stake to Berkshire Hathaway Inc. However, DePaul University finance professor remains unconvinced that Bank of American is immune from needing federal assistance. “At some point, being too big is being too unwieldy and too difficult to govern. The only thing you get from being the biggest is ‘too big to fail’ and they (Bank of America) have that.”

Matt McCormick, who is an analyst and money manager for Bahl & Gaynor Inc. and is responsible for $4 billion says, “The last thing the administration wants them (BAC) to do is have headcount reductions, especially in North Carolina, which is a huge swing state.” McCormick later acknowledged that “the financial industry is shrinking and banks are shrinking.”

News of the downsizing resulting from Project New BAC was already being published in local newspapers and websites on Wednesday, as Phase II of the cuts are scheduled to begin in October and last through March of next year.