Exile on Wall Street | Mike Mayo

Summary of: Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves
By: Mike Mayo


In ‘Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves,’ Mike Mayo offers an insightful look into the workings of Wall Street and its deep-rooted issues that prioritize self-interest over ethics. In his journey as a banking analyst, Mayo discovered that bank examination must be driven by a sense of civic virtue and detachment from the banks being monitored. However, the reality on Wall Street tells a different story, as it often pressures analysts to compromise on their principles. In this summary, you’ll explore Mayo’s experiences on Wall Street, learn about his interactions with high-profile bankers, and follow his unwavering commitment to maintaining transparency and integrity in the banking sector.

Wall Street’s Lack of Ethics

Mike Mayo started his career in banking examination guided by the industrious values of his immigrant family, where “civic virtue” drove his work and detachment from the banks. He became a chartered financial analyst while working at the Fed and admired former Fed chairman Paul Volcker’s belief that regulators are responsible for keeping the financial system safe and steady, not for helping banks make money. Both of them refused to cater to special interests in their work. On Wall Street, self-interest often prevails over ethics, and Mayo witnessed how the overriding desire to make money could lead even the most stalwart individuals to cut corners to make a deal. Despite being put through hell for his principles, Mayo held firm and was eventually proven right. The huge amounts of money on Wall Street make it easy to lose one’s way. Mayo’s story is an eye-opener exposing the unsavoury side of the banking industry, which has faced repeated criticisms for its lack of ethics.

A Wall Street Rebel

Mike Mayo’s journey through Wall Street is captured in this book. Mayo started as a Federal Reserve economist, then transitioned to a junior analyst job in Union Bank of Switzerland (UBS) where he built his reputation through the development of analytical models. His reports were often unfavorable, which did not settle well with senior bankers, colleagues, and bosses. However, Institutional Investor named Mayo one of its “All-Star Analysts” in 1997 and top regional bank analyst in 1998. Mayo left Lehman Brothers in 1997 to head the bank research group at Credit Suisse First Boston. Here, his forthrightness won support from some colleagues, but it also drew disapproval, the opprobrium of banks, and financial media when he advocated for a wholesale sell-off of bank stocks. Some bank executives began denying Mayo’s requests for meetings, while others threatened to pull their business from his employer. As the market for bank stocks dropped and a wave of financial-sector mergers swept up Credit Suisse First Boston, Mayo found himself without a job in 2000.

Mayo’s Crusade for Independence

Mayo’s career as an independent investment analyst at Prudential Securities began just as Wall Street’s malfeasance exposed the skewed assessments of companies by several analysts was rocking the industry in 2001. Mayo was unyielding in his criticism of Citigroup, and in 2002, he testified before the US Senate Banking Committee to highlight the heavy bias towards corporate clients as opposed to investor clients. He believed independent investment analysts were on the front lines of holding corporations accountable, which was crucial after the financial creativity that led to the fiscal crisis. Mayo’s fearless approach led to tense moments, like when he was publicly criticized by Jamie Dimon, CEO of Bank One, for his negative write-ups on the company, which drew media attention before ultimately being resolved.

The 2008 Financial Crisis: A Cautionary Tale

Mayo’s skepticism towards Wall Street and the financial sector’s lack of transparency was vindicated by the events of the 2008 financial crisis. Banks strayed from their core function into peripheral activities that spread risk, leading to the maelstrom. Mortgages were packaged and resold to investors, but risk exposure remained hidden. Even after the crisis, banks remained opaque about their exposure. Mayo highlights that risky loans, aggressive banks, and inept regulators are not the exception but the rule, urging us to be more skeptical of Wall Street.

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