Thursday, August 9, 2012

Review: Exile on Wall Street, by Mike Mayo

The author of Exile on Wall Street, Mike Mayo, has worked as a research analyst at several major investment banks for the past 20 years; the book is a chronicle of the recent crisis and what Mayo views as the causes, as well as a discussion of what has - and hasn't - changed.

There are a quite a few books that cover some aspect of the recent financial crisis, but I was particularly interested in Exile on Wall Street for a simple reason: I worked with its author, Mike Mayo, during part of the time period he discusses in the book. I was an editor in the Research Department at CSFB at the time he joined. I also worked briefly with his predecessor, Tom Hanley.Mayo wouldn't remember me, but I certainly remember him. His outsized reputation terrified me, so whenever I had a question, I dealt instead with his staff. Once or twice I considered approaching him directly, but he was always busy - always - and his demeanor was that of someone who wouldn't take kindly to being interrupted. I wasn't new to the industry and had worked with many top-ranked analysts by the time I worked with him; he was something different.

It was fascinating to read about the financial crisis from his point of view, someone who saw it coming and attempted, repeatedly, to sound the alarm. It was equally fascinating to me to read this book in which, that this outspoken, terrifying, powerhouse of my memory comes across as a likeable and decent guy - if somewhat opinionated. For those who think that all Wall Streeters are Master of the Universe types, it is refreshing to read about Mayo not only having insecure moments, but asking his wife's opinion when they happen; in one memorable moment, he is getting ready for an important meeting, he's already a well-known name in the industry, and he spends time picking out exactly the right tie to make him "look important."

The book's second half was most interesting. It begins with a detailed history of Citigroup, explaining a lot of the factors that contributed to the meltdown through the illustrative example of that one company, which Mayo views as one of the worst, due in large part to a corporate culture lacking in accountability. He discusses the dismantling of the Glass-Steagall act, which was a direct consequence of the merger that created the current Citigroup; G-S was the act that had previously prevented the creation of Too Big To Fail entities.

Mayo makes some suggestions for the future of the industry; one of the most interesting, I thought, was the idea that rather than selling failing banks to other large entities, creating still larger and more difficult to supervise banks, failing banks should be broken up and sold off in pieces. It makes a lot of sense: it's much easier to turn a smaller ship than an ocean liner.

In spite of having sounded an unheeded alarm for many years, Mayo does not come across and bitter or unpleasant; he's also fully aware of the public perception of Wall Street. In spite of everything, he displays a sense of optimism that I found refreshing.

If you're looking for a compelling page turner about the financial crisis, House of Cards or The Big Short are better choices. If you're simply looking for a bit more insight, though, Exile on Wall Street is a good, quick and insightful read.

FTC Disclosure: I borrowed this book from the library.

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