It's a dank, sunless day in New York, and by late afternoon, bands of dark rain clouds have started moving over the crowded, makeshift camp in Zuccotti Park.
Four miles uptown, analyst Mike Mayo is sitting in his small, one-window office at Credit Agricole Securities (USA), the brokerage that hired him in 2009 to cover the U.S. banking sector. Winter is still a few weeks away, and the bleak weather has Mayo wondering if the Occupy Wall Street crowd will stick around long enough to actually develop any coherent ideas for fixing the U.S. financial system—or whether the movement will be nothing more than a disorganized expression of the frustrations he himself has experienced for the more than two decades he's been observing and wrangling with big banks.
Love him or hate him, and you'll find plenty of both sentiments among the financial cognoscenti, Mayo has long been a critic of unbridled pay packages that enrich management even when investors don't share in the good fortune. He's tried to shed light on accounting tricks that can make corporate ledgers look healthier than they are, and he has never been afraid to get negative on banks, even in periods when bearish calls on the sector were rare.
Though Mayo disavows the fringe elements that glommed onto the Occupy Wall Street movement to seize on the publicity, he scoffs at those in finance who have roundly dismissed the protesters as out-of-touch anti-capitalists.
"I'll introduce you to some anti-capitalists, and that's the CEOs of big banks," Mayo says, the pitch of his voice ascending. "I'll show you socialists: socialists are government officials bailing out the bad banks along with the good banks."
But while he harbors many of the mainstream frustrations aired at Occupy Wall Street—about a month into the protest, he brought his 9-year-old son to Zuccotti Park for an object lesson in the issues dad grapples with at work every day—Mayo is adamant, to a degree that would likely turn off many in the movement, that there is nothing wrong with the underpinnings of the U.S. financial system. "Capitalism didn't cause the problem. A lack of capitalism caused the problem," he says.
As a securities analyst covering bank stocks, Mayo's aspirations go well beyond having his best investment ideas validated by the market. His goal now is nothing short of helping the country figure out how to practice a purer form of capitalism. "What's unconscionable," he says, "is that after the system almost blew, you still have all these anti-capitalist practices."
Mayo offers a list of proposed fixes in "Exile on Wall Street," an autobiographical account of his career, published in November. He writes that companies should have to disclose material risks earlier, and with greater detail, so that banks, for example, would have to provide a fuller accounting of the potential legal expenses tied to things like securitized mortgages. He suggests that auditors, for all the hours they spend analyzing company books (and the big fees they collect for doing so), ought to be providing investors with more actionable information, and detailed assessments that go beyond a simple pass/fail test.
He says that financial statements should reflect the substance of transactions, and not just the legal mechanics of them, to curtail the shifting around of assets and liabilities done for the sake of window dressing, as in the notorious Repo 105 transactions carried out by Lehman Brothers. And using examples from his own career and from his observations of the regulatory community, he argues that more must be done to transfer clout from big bank executives to regulators and others in a position to provide a check on the markets.
