Business Books; Book Review; Wall Street analysis; In need of therapy;
Exile on Wall Street: One Analyst's Fight to Save the Big Banks from Themselves. By Mike Mayo.
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.
Mr 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 stopped him from having a successful career. There are many reasons for this. Mr Mayo hates being criticised, but has few reservations about criticising others. He has a deep belief in capitalism, but holds many of its leading practitioners in contempt; J.P. Morgan's Jamie Dimon is almost alone in drawing praise. He writhes if he feels his employers are disloyal, yet shows little loyalty himself, seemingly always on the prowl for a better opportunity.
Such qualities are vital in a profession where objectivity is important and constantly tested. For the friendly analyst there are gourmet meals, rides on private jets, subsidised nights at strip clubs and, with luck, a bigger slice of profits. By contrast, when in 1999 Mr 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 scepticism about Citigroup, took years to be proved right. If he had run his own fund, Mr 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? Mr 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. Since the financial crisis, Mr Mayo's 1999 report has become the conventional wisdom. To create another stir, he may need to become positive.