Business bookshelf: "Exile on Wall Street"

January 14, 2012 at 9:44PM
(Star Tribune/The Minnesota Star Tribune)

Mike Mayo, Wiley, 208 pages, $29.95

Mike Mayo likes to ask blunt questions about issues that no one else will touch. To some, his queries are sparklers that light up dreary quarterly earnings calls between the heads of major banks and financial analysts; to others, they come from nowhere, rockets that bring down banking's high-fliers.

Mayo is a well-known bank analyst who currently works for Crédit Agricole Securities USA. He has been a star attraction at half a dozen firms, is beloved by the media, followed by clients and loathed by whatever institution happens to have earned his derision. This approach has cost him a succession of jobs, but it has not blocked him from a successful career.

In 1999, when Mayo issued a 1,000-page report telling the industry he covered that the good times were over, the consequences were uncomfortable. The report made his reputation but cost him his job. In describing his struggles in the intervening years, he writes: "Large banks have enough clout to beat the living daylights out of anybody who gets in the way--politicians, the press or analysts like me."

Markets can be equally unkind. Some of his best calls, notably a persistent skepticism about Citigroup, took years to prove correct. If he had run his own fund, Mayo says, he would have made a lot of money over time, but "I probably would have folded several times as well." Sometimes, notably in the case of Lehman Brothers, his view proved too optimistic.

But why, overall, aren't the big financial firms, and the analysts who cover them, better at the job? Mayo offers the usual reasons: corruption, lousy disclosure, ridiculous compensation packages for incompetent managers who are overseen by incompetent regulators, conflicts of interests that are little short of rife. All of this he illustrates with names and dates, a close-up view of venality that, by itself, makes "Exile on Wall Street" a story worth reading.

THE ECONOMIST

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about the writer