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Ear to the Ground

In Exile on Wall Street

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Posted on Nov 5, 2011
Wikimedia Commons

In a financial system where most bank analysts are “little more than cheerleaders,” one has spoken out at the risk of being mocked and alienated by Wall Street.

Longtime bank analyst Mike Mayo became a joke on Wall Street, and all because he tried to do the unthinkable—correct the broken banking sector. His attempts resulted in the media mocking him, banks avoiding his calls and his co-workers ostracizing him. In his new book, “Exile on Wall Street,” Mayo gives an account of his experiences and offers suggestions on how to fix a flawed financial system.  —NH

“Exile on Wall Street” excerpt in The Wall Street Journal:

Taking a negative position doesn’t win you many friends in the banking sector. I’ve worked as a bank analyst for the past 20 years, where my job is to study publicly traded financial firms and decide which ones would make the best investments. This research goes out to institutional investors: mutual fund companies, university endowments, public-employee retirement funds, hedge funds, and other organizations with large amounts of money. But for about the past decade, especially the past five years or so, most big banks haven’t been good investments. In fact, they’ve been terrible investments, down 50%, 60%, 70% or more.

[...] Over the years, I have pointed out certain problems in the banking sector—things like excessive risk, outsized compensation for bankers, more aggressive lending—and as a result been yelled at, conspicuously ignored, threatened with legal action and mocked by banking executives, all with the intent of persuading me to soften my stance.

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By gerard, November 6, 2011 at 8:29 pm Link to this comment

And by the way, while we are at it—the support of the 99% is, on the whole, rather underwhelming, from my point of view.  Are we sure we are doing all we can?  Or are we waiting for some shoe to fall somewhere to tell us which direction is true north?

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By gerard, November 6, 2011 at 6:15 pm Link to this comment

Second thoughts here:  A recent Truthdig program/article quoted Hedges regarding why the 1% can rob us blind and just sit back and smirk. He contended they are “clueless.” 
  This article works against that theory entirely, as this Mike Mayo broker guy apparently is far from clueless.  In fact, he is so “clued in” that he is being isolated for giving away the family secrets by recommending a cure for the greed disease.
  So they’re NOT clueless. That leaves alternatives like “they can’t help it” or “they are doing it on purpose” or “they enjoy hurting 99% of the “other” people. Or “they can’t help it.” Or, “they think they deserve to hog the country’s resources, tie up its economic “system” and sit back and do nothing.”
  Somehow, it bothers me that none of them know why this is happening. And none of them know what could be done to prevent it. And when one of them suggests something, he becomes a bete noir.
  And when thousands of young people are camping out and trying their best to “speak truth to power” as they say—they are subjected to insult, suspicion, criticism, scorn and the undeserved aggressiveness of over-armed police. 
  The silence coming out of the towers downtown is deafening.  Something stinks. It would appear as though “cluelessness” works as a pretty good evasion of some fairly important facts. If you smell smoke, could be they’re cooking the books, getting ready for a more or less superficial Congressional “investigation” and working with the Supremes to draw up a new set of exculpatory laws.

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By Blueokie, November 5, 2011 at 11:20 pm Link to this comment

Yet another link in the undeniable chain of evidence that the only thing Wall Street
really produces is on the ground behind the bull.

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By gerard, November 5, 2011 at 5:04 pm Link to this comment

It’s some relief to hear from at least one Wall Street “insider” with suggestions that would make bankers and brokers at least somewhat more responsible for the damage that accrues from capitalists to make 99% of their fellow-citizens fall from poor to poorer to poorest.
  After all, as people who have created the money crisis, they have a primary responsibility to initiate solutions. Yet the 99% of the 1$ “insiders”
are conspicuously silent, except for a few like Mr. Mayo, who appears to be a significant whistle-blower
willing to say: “We need a cultural, perhaps generational, change that compels companies to better apply accounting rules based on economic substance versus surface presentation. Even in 2011, some banks were woefully deficient in detailing the amount of their securities and loans that are vulnerable to the ravages of the European financial crisis. The solution is to increase transparency and let outsiders see what’s really going on.” His suggestion:
  “What we need is a better version of capitalism. That version starts with accounting: Let banks operate with a lot of latitude, but make sure outsiders can see the numbers (the real numbers). It also includes bankruptcy: Let those who stand to gain from the risks they take—lenders, borrowers and bank executives—also remain accountable for mistakes.”
  Some of us doubt that this would be balanced enough to prevent evils like predatory lending, but at least it’s a start. Sounds a bit more forgiving than most of us probably feel is real justice—but guillotines, pillories, waterboarding and imprisonment in most state prisons doesn’t seem to work very well either, as recidivism rates remain high. 
  So let’s try some “intelligent design” on Wall Street, for a change.

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