By Colin Barr
April 15, 2011

Another day, another executive suite shakeup at foundering Bank of America.

The biggest U.S. bank said Friday it hired Gary Lynch, a former Securities and Exchange Commission enforcement chief, to oversee legal and regulatory relations. It is a big job, as BofA’s (bac) legal costs are soaring and its relationships with its regulators are in tatters, as evidenced by the bank’s painful scrape with the Fed over its dividend plans.

Lynch was a London-based vice chairman at Morgan Stanley (ms). He has had a long career on Wall Street and if anyone can undo the damage Moynihan and his crack team have done, it is probably him.

“Gary’s global legal and regulatory expertise and relationships will be a valued addition to our leadership,” Moynihan said. “We are delighted he has chosen to join Bank of America and help guide the execution of our customer-focused strategy.”

BofA also said Charles Noski, who was named chief financial officer just a year ago, will step aside due to family illness. He will become vice chairman.

Bruce Thompson, BofA’s chief risk officer, will replace Noski as finance chief when Noski gives up that job at the end of the second quarter. A year isn’t long to stay in a highly visible post like CFO, but the bank says the change came at Noski’s request.

“We value Chuck’s judgment, counsel, and experience,” said Moynihan. “I am very pleased he has accepted this leadership position, which also enables him to attend to important personal matters.” 

But his departure hardly comes as a surprise, after reports this week that Moynihan bypassed him in making the filing last month that advised investors the Federal Reserve had quashed his lunatic plan to increase the bank’s dividend in the second half.

And let’s face it, someone’s head had to roll after the sorry performance BofA has been putting up lately.  Its shares have lost a third of their value over the past year, and recent quarters have brought repeated unhappy surprises for investors.

BofA reported an unexpected fourth-quarter loss in January under the weight of a $2 billion home lending writedown, a $4 billion mortgage dispute settlement and $1.5 billion in litigation costs.

On Friday, the bank returned to profitability but missed analyst estimates. BofA noted in Friday’s first-quarter earnings release that it took an $847 million hit to pay for representations and warranties claims – covering mortgages that investors and others demand the bank buy back because corners were cut.

That story is far from over, as BofA – thanks to the Countrywide acquisition masterminded by Moynihan’s Ahabesque predecessor, Ken Lewis – has the biggest, ugliest mortgage book in the Western hemisphere.

And of course Lynch will have his hands full with legal issues tied to Lewis’ other signature deal, the acquisition of Merrill Lynch, which was a big player in the abuse-laden subprime debt market that belatedly is getting the authorities’ attention again lately.

Friday’s moves come two months after Moynihan hired Terry Laughlin from OneWest Bank to run off some of the worst subprime dross. No word yet on how that’s going, but Friday’s shakeup shows Moynihan is, at last, aware the clock is ticking on his reign.

Also on Fortune.com:

Follow me on Twitter @ColinCBarr.

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