Cover image for The failure of Wall Street : how and why Wall Street fails--and what can be done about it
The failure of Wall Street : how and why Wall Street fails--and what can be done about it
Banks, Erik.
Personal Author:
First edition.
Publication Information:
New York : Palgrave Macmillan, 2004.
Physical Description:
292 pages ; 25 cm
Format :


Call Number
Material Type
Home Location
Item Holds
HG4572 .B28 2004 Adult Non-Fiction Central Closed Stacks

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Wall Street, the world's primary financial market and middleman, is in many ways a success. It brings together and places capital, creates new and innovative financial products, and buys and sells physical and financial assets. Its role in global economic growth has been, and remains, unique and vital. In spite of its importance and strengths, however, Wall Street repeatedly fails. At all levels, Wall Street makes serious mistakes in its core areas of expertise -- falling short of its potential when raising capital, giving advice or managing risk, and demonstrating vulnerabilities when carrying out its responsibilities. These failures, which damage both finances and reputations, often affect a broad range of insiders and outsiders: employees and managers, personal and corporate clients, investors, creditors and regulators. In some cases they destabilize entire sectors and economies. Worse, many of these failures are likely to plague Wall Street for years to come, until there is greater willingness to recognize and resolve the underlying problems.

The Failure of Wall Street analyzes how and why Wall Street fails, and what can be done to rectify the failures. After a short discussion of Wall Street's role in raising capital, granting corporate and personal advice, managing risk and acting as a trusted financial analyst, Erik Banks explores the dramatic failures that have occurred in each of these areas, using case studies and examples to illustrate the nature and extent of the problems. Next, the book demonstrates why Wall Street fails in each area of supposed"expertise," focusing on shortcomings in governance, management, skills/controls and transparency. Lastly, Banks proposes a framework for addressing the shortfalls that continue to plague Wall Street. He argues that these solutions, while not quick, easy, or cheap to implement, can help make Wall Street become the sound, consistent, and efficient financial expert it is meant to be.

Author Notes

Erik Banks spent sixteen years on Wall Street, most of it at a major global investment bank. After training and early job experience in New York, he spent eight years running departments in Tokyo, Hong Kong, and London, and then returned to New York as a managing director. Mr. Banks retired from Wall Street in 2002 to write full time

Reviews 2

Booklist Review

Banks, a Wall Street veteran, sets out to explore its failures--and constructively proposes changes to ensure more winners and fewer losers--and to showcase its triumphs. The Street is a global financial conduit. Location is irrelevant--be it lower Manhattan, anywhere else in the world, or through the electronic medium--and the Street has the five basic tasks of raising capital, giving corporate advice, giving personal financial advice, performing fiduciary duties, and managing risk. The author explains how and why it fails and proposes solutions for overcoming its failures, including excellent regulators and auditors, punishing violators, and ensuring that clients and shareholders demand appropriate behavior. Banks reports that the mistakes in the Street's core areas of expertise have many causes, including flawed governance, bad management, conflict of interest, and weak internal checks and balances that stem from its focus on maximizing profits, sometimes at any cost. The author claims that it's hard to think of another industry that stumbles as often and badly. --Mary Whaley Copyright 2004 Booklist

Choice Review

Banks, an experienced practitioner and author of several finance books, analyzes how and why Wall Street fails in its primary functions: raising capital, giving corporate and personal advice, undertaking fiduciary tasks, and managing risks. The volume is well written, informative, and full of examples. Banks's recommended reforms are sound, e.g., having the "right directors in place so that it [financial institution] can do the right thing by the shareholders and continue to tap into the all-important supply of capital." Yet, how does one determine who the "right directors" are? Neither can one quarrel with his admonitions to "demand ethical behavior," "remember the client," or "demand independence." As Charles Kindleberger points out in his classic Mania, Panics, and Crashes (4th ed., 2001), the abuses that characterized the late 1990s differ in details from earlier historical examples, but they occurred at the peak of a cycle. The behavior Banks describes has been prevalent for centuries. The question is whether the "Street" can reform itself or the regulatory agencies can "reform" the Street. Nevertheless, despite mistakes, the heart of "financial capitalism" (Wall Street) has, over the long haul, been the catalyst for facilitating growth through capital formation. Timely reading given recent financial difficulties in the headlines. ^BSumming Up: Recommended. General readers, undergraduate students, and professionals. W. S. Curran Trinity College (CT)

Table of Contents

Acknowledgmentsp. vii
Biop. viii
Part I How Wall Street Fails
Chapter 1 Wall Street and Its Rolep. 3
Chapter 2 When the Intended Role Failsp. 17
Chapter 3 Problems Raising Capitalp. 29
Chapter 4 Bad Corporate Advicep. 51
Chapter 5 Bad Personal Financial Advicep. 87
Chapter 6 Breaching Trustp. 111
Chapter 7 Bad Risk Managementp. 165
Part II Why Wall Street Fails
Chapter 8 Internal Breakdownp. 203
Chapter 9 External Weaknessp. 229
Part III Overcoming Failure
Chapter 10 Getting the House in Orderp. 247
Chapter 11 Shoring Up the Defensesp. 265
Chapter 12 Summary: What's Next?p. 279
Notesp. 285
Indexp. 289