Nov. 23 (Bloomberg) -- Bank of America Corp.’s board may extend its search for a permanent new chief executive officer into 2010 if directors can’t settle on a candidate in the next three days, according to people familiar with the matter.

The directors, who met Nov. 20, may be willing to go past their Nov. 26 target and the Dec. 31 retirement of CEO Kenneth D. Lewis if it means getting a better choice, according to a person familiar with the deliberations. At least four external candidates, including Citigroup Inc. director Michael O’Neill, rebuffed approaches. Options include an interim chief or a delay in Lewis’s retirement.

Bank of America faces pressure to pick someone in a short period who’s acceptable to regulators and whose pay would be low enough to win approval from Treasury Department paymaster Kenneth Feinberg, the people said. Politics also has influenced the choice at the biggest U.S. bank, the people said. House Oversight Committee Chairman Edolphus Towns said last week Brian Moynihan, one of two internal candidates, may lack the needed leadership.

That’s narrowing the field and giving the board “an incredibly tough job,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “For people who have choices, it’s hard to figure out why someone would take this job.”

The people familiar with the matter spoke before any board meetings this past weekend. They declined to be identified because CEO selection is confidential at the Charlotte, North Carolina-based bank.

Decision Nears

Bank of America representatives have said the bank was aiming for a decision by the Nov. 26 Thanksgiving holiday, calling it a target rather than a deadline. “The board has been talking to a number of candidates, both internal and external, and expects to have a decision in the very near future,” spokesman Robert Stickler said in a Nov. 20 e-mail.

Holland said director Charles K. “Chad” Gifford, a former CEO of FleetBoston Financial Corp., which was bought by Bank of America in 2004, could step in on an interim basis.

Some candidates are reluctant to wade into disagreement between board members and the government over the bank’s future strategy, said Rochdale Securities LLC analyst Richard Bove, citing large shareholders briefed on the matter.

“The government and perhaps some of the new directors want the bank cut back in size, while the old core Bank of America people don’t want to do that,” Bove said.

Dropping Out

O’Neill, a former chief financial officer of predecessor BankAmerica Corp., withdrew from consideration after talking with search-committee members because he felt they didn’t fully grasp how serious regulators are in their demands for change, the people said.

O’Neill told the committee members that the company needed to increase the size of its banking operations and shrink its trading business, one person briefed on the talks said. The committee members responded that such a shift would be unproductive because it would abandon the strategy set when Lewis bought Merrill Lynch & Co., the person said.

Compensation is another obstacle, because Bank of America’s $45 billion bailout from the Troubled Asset Relief Program puts the CEO under the purview of Feinberg, the paymaster. Lewis agreed in October to forgo any pay for 2009 after being advised to do so by Feinberg. Feinberg’s pay restraints have limited the board’s options, one of the people said.

Feinberg’s Role

Feinberg probably wouldn’t approve a package big enough to lure PNC Financial Services Group Inc. Senior Vice Chairman William Demchak, who was among 18 candidates on a list provided Nov. 3 by Finger Interests Ltd., a Houston-based investment fund with 1.1 million Bank of America shares. As of August, Demchak owned about 219,000 PNC shares, currently worth about $12 million, data compiled by Bloomberg show.

Bank of America may need to buy out stakes in competing lenders owned by candidates like Demchak to prevent a conflict of interest. Some candidates could be eliminated because Feinberg isn’t likely to approve their buyouts on concern that Congress wouldn’t tolerate large payments, according to a person familiar with the process. Getting rid of TARP would eliminate that obstacle as well as unwanted input from regulators, according to a person familiar with the board.

Finger Candidates

The Fingers helped lead a shareholder revolt that stripped Lewis of his chairman’s title in April. At least four people on the Finger list subsequently said they weren’t interested. They are O’Neill; former JPMorgan Chase & Co. investment-banking co- head William Winters; U.S. Bancorp CEO Richard Davis; and Eugene McQuade, a former Freddie Mac president who now oversees Citigroup’s largest banking subsidiary, according to people familiar with the matter.

Two executives not on the list, Bank of New York Mellon CEO Robert Kelly and BlackRock Inc. CEO Laurence Fink, have told colleagues and friends they’re not interested.

Ex-GMAC LLC CEO Alvaro de Molina, a former Bank of America chief financial officer who also made the list, was never contacted, people said. Charles Scharf, head of retail banking at JPMorgan, was contacted, people familiar with the matter said. Scharf and de Molina declined to comment.

Aside from Moynihan, 50, other internal candidates include Chief Risk Officer Gregory Curl, 61. Lewis, 62, favors Curl, one person familiar with the matter said earlier this month.

Fed’s Choice

Federal Reserve officials, who questioned Lewis’s judgment when he considered backing out of the bank’s $29 billion purchase of Merrill Lynch, are pressing for an outsider because they want more drastic change, a different person said.

“B of A would really benefit from a fresh set of eyes and a fresh management approach,” said William Atwood, executive director of the Illinois State Board of Investment, which holds 2 million Bank of America shares. “It would be a bad thing if they’re focusing their attention internally.”

Lewis has indicated to associates that he would remain as CEO on an interim basis if asked by the board, according to a person familiar with his thinking. Rochdale’s Bove wrote in a Nov. 20 note that several large investors support the idea.

“That would give the board time to get their ducks in a row and they would have more breathing room,” said Marc Oken, a former Bank of America chief financial officer who left in 2005.

It also would be a discouraging sign of how poorly the search is going, Atwood said.

“If that’s their best option, they’re really not doing very well,” Atwood said.

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net

Last Updated: November 23, 2009 10:43 EST