Exile on Wall Street

The protesters are still there, in Manhattan’s Zuccotti Park and outside St Paul’s in London, but their staying power does not mean the message has grown less vague or trite. They need a manifesto: Mike Mayo’s Exile on Wall Street might help.

Mayo is either the ultimate outsider’s insider to Wall Street or its insider’s outsider. As a bank analyst for the past 19 years he has watched, written about, worked for and fought with Wall Street luminaries such as JPMorgan’s Jamie Dimon and Citigroup’s Vikram Pandit.

Preceded by a stint as an official at the Federal Reserve in Washington, it is a career that allow him to tell a compelling tale about the iniquity and inequities of the business he covers. Those two decades have brought the dotcom boom and bust, the continuing financial crisis and dozens of smaller scandals along the way.

In his memoir he charts the Street’s ebullience and despair and the many compromises, lies and downright illegalities perpetrated by its denizens. The fact that he can even write this stuff, as a still practising analyst, is a credit to his current employer, the relative minnow CLSA Securities.

The tale, though, is driven by all the times he wrote what he thought about the banks and was punished – shut out of companies, denied access to investor calls and mocked for “sell” recommendations on stocks. As Mayo tells it, he has been fired for negative views on companies from which his employers have wanted to extract lucrative investment bank work.

There is plenty of pride in Mayo. He is too keen to bridle at the slightest jibe. Mr Dimon, then head of BankOne, jokes about his calls at an investor conference and all of a sudden Mayo is telling his boss they should stop covering the company and wondering whether he should seek redress from the authorities: “I would call the Fed, the SEC, Senator Sarbanes himself!” In an incident that happened after the book was written, he claimed to have been denied a question during an analysts’ call only to discover later that he had dialled the wrong, “listen-only” number.

This tension is rare between analysts and the companies they often too supinely cover. Mayo’s fight over access to Citigroup is wearying to read, but it must have been wearying to go through. If he boasts too much about his integrity, it is nonetheless a valuable characteristic, coupled with his readiness to tell the full story, trenchantly and well. The 175 pages zip through Wall Street mis-steps and misdeeds with complex financial minutiae told well and allegories that elucidate rather than grate. Banks, for example, should be more like utilities. “You never hear about a water company executive making $30m a year. And the water’s never turned off because some trader shorted an aquifer,” he writes.

Mayo may be a presence in the press but, unlike some other analysts, that is not because he is a perma-bull or a perma-bear. He tells it straight, to the best of his ability – banks do not like it, investors sometimes like it and the media usually likes it.

Despite his ego, the personal story takes a back seat to the industry tale and, where it does appear, it is interesting. His stepfather, whose invented surname Mike took, sleeps with a gun beside his bed for most of his life, anticipating World War III. In 2008, Mayo junior is – and remember, this is a man who has spent his career understanding banks – so worried about impending economic catastrophe that he withdraws $10,000 in cash and stashes it in his house.

That money probably did not come from an ATM, but Mayo is against the government banning fees on cash withdrawals or, as it has just done, capping fees related to debit card charges. “If the government were to set a cap on how much McDonald’s could charge for Big Macs, it wouldn’t take long before the price of fries went up to cover the difference.”

In a country that lacks institutional shareholders willing to speak out about the wrongs visited on them, Mayo is their proxy. Why did chief executives at KeyCorp and SunTrust, two large regional banks, pay themselves $20m each between 2008 and 2010 when they presided over vast losses? “I don’t need to see tears from the executives of US banks but at least some recognition that the real owners of these companies – the shareholders – matter.” What could turn the Occupy Wall Street protesters into something bigger, drawing in parts of the Tea Party and some traditional Democrats and Republicans, would be to attack corporate America from a free-market angle. “That’s not capitalism,” Mayo says of the lavishly paid executives, “that’s entitlement.”

The writer is the FT’s US banking editor

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