In the wake of Bank of America CEO Ken Lewis’ sudden retirement last week — effective at the end of the year — there is a lot of speculation about who the next CEO will be, particularly since he or she will likely inherit a firm that still owes the government $45 billion from the Troubled Asset Relief Program (TARP).

One of the candidates being mentioned as a possible successor to Lewis is Sallie Krawcheck, the head of Bank of America’s wealth-management unit. That position, which Krawcheck moved into two months ago, now comes complete with the honor of overseeing Merrill Lynch, the troubled investment broker that BofA bought in the midst of the economic crisis.

In an appearance yesterday on CNBC, Krawcheck was asked whether she intends to change compensation practices at Merrill Lynch, an idea which she derided as “stupid,” because she wants to “honor the culture” at Merrill:

The first line of being a successful manager is don’t do stupid things. And so, trying to go and change the compensation — I’ve heard we’re going to try and smash U.S. Trust and Merrill together — we’re not doing any of that stuff. What we want to do is bring these great capabilities that we have to clients, [and] honor the culture…The industry always tinkers with compensation on the edge. For the industry, it’s sort of an annual ritual.

Watch it:

But maybe Krawcheck should take a closer look at what went on at Merrill, before its implosion, because the culture regarding pay doesn’t seem like something worth holding onto. As New York Attorney General Andrew Cuomo’s office pointed out, “large payouts became a cultural expectation” at Merrill Lynch, even when the company tanked:

[A]s Merrill Lynch’s performance plummeted, Merrill severed the tie between paying based on performance and set its bonus pool based on what it expected its competitors would do. Accordingly, Merrill paid out close to $16 billion in 2007 while losing more than $7 billion and paid close to $15 billion in 2008 while facing near collapse. Moreover, Merrill’s losses in 2007 and 2008 more than erased Merrill’s earnings between 2003 and 2006. Clearly, the compensation structures in the boom years did not account for long-term risk, and huge paydays continued while the firm faced extinction.

700 Merrill employees received bonuses of $1 million or more in 2008. The Wall Street Journal also pointed out that “the second largest Wall Street bonus of 2008…was the $39.4 million paid out to Thomas Montag,” Merrill’s head of global sales and trading. Montag’s unit “piled up the brunt of the company’s $15.31 billion net loss in the fourth quarter of 2008,” which “forced taxpayers to shell out an additional $20 billion to Bank of America to make sure its $50 billion acquisition of Merrill closed in January 2009.”

Of course, BofA is one of the companies whose pay packages are subject to review by the Obama administration’s “compensation czar,” Kenneth Feinberg, who may have a different feeling regarding whether Merrill’s compensation culture is worth preserving.

One of the nastier bank practices that has arisen in recent years is banks automatically enrolling consumers in accounts with expensive overdraft protection, and then charging exorbitant overdraft fees without ever letting people know that their account is overdrawn.

In theory, overdraft protection is meant to prevent a small check from bouncing — as the bank would cover the amount of the check and collect from the consumer later — but with the rise of debit cards, overdraft fees have become an easy way for banks to raise lots of cash from unwitting consumers. The standard overdraft fee now stands at $34, and banks re-order purchases — “debiting large transactions before small ones” — in order to charge multiple fees.

This is an awful mess, and according to a report released today by the Center for Responsible Lending, at least 50 million Americans overdraw their accounts over the course of a twelve month period, 27 million of which incur five or more fees. Banks and credit unions collected $24 billion in overdraft fees in 2008, a whopping 69 percent of total bank fees. Shockingly, the Center noted that Americans spend more on overdraft fees annually than they do on fresh vegetables.

You’d think these numbers might give the banks at least a moment’s pause. But the American Bankers Association (ABA) — the banking industry’s largest trade group — shrugged them off, saying that consumers are actually “glad” about being hit with overdraft fees, because they are then saved the embarrassment of having their debit card rejected:

“Clearly, consumers who pay overdraft fees are the minority, and that number is shrinking,” Nessa Feddis, ABA senior federal counsel, said in a statement in response to the study. “More importantly, most consumers want banks to pay their overdrafts so they can avoid the inconvenience, embarrassment and potential costs of having a payment or transaction rejected.”

So in the ABA’s world, consumers are actually thrilled about paying a bunch of $34 fees, because it saves them some face at the checkout counter. Not only is that a sorry justification, but it isn’t even true. 80 percent of consumers actually say that they would rather have their debit card rejected for a $5 purchase than be charged an overdraft fee, which only falls to 77 percent when the price of the purchase is increased to $40.

Data from the research company Moebs Service shows that banks are expected to collect $38.5 billion in overdraft fees in 2009, but as Mike Lillis noted at the Washington Independent, the banks’ behavior has “caught the eye of some powerful lawmakers.” Rep. Carolyn Maloney (D-NY) has crafted a bill that would “prohibit banks from charging the fees unless consumers sign up for the overdraft protection service,” and would also “prevent banks from reordering purchases” in order to maximize fees.

Sen. Chris Dodd (D-CT) is reportedly working on similar legislation, while Rep. Barney Frank (D-MA) has said that the Consumer Financial Protection Agency (CFPA) that has been proposed will be responsible for policing overdraft fees.