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The Book of the Week is “Confessions of a Wall Street Analyst, A True Story of Inside Information and Corruption in the Stock Market” By Dan Reingold with Jennifer Reingold, published in 2006.
The author happened to become a telecommunications-industry stock analyst, hopping from one big-name investment bank to another. This, at the start of about two decades of an excessively deregulated, gravy train of greed on Wall Street: the early 1990’s. He described his job as requiring lots of reading and writing, and as having long, long hours. He got to travel around the world to meet his contacts, and gossip with industry competitors. The compensation he collected for doing so was obscene.
The U.S. government had just acted on a wave of anti-trust sentiment, so competitors were scrambling to game the situation. Telephones were going wireless, while their service providers were merging like crazy.
The author detailed the changes in the industry, including how it became corrupted by the usual suspects– greedy Wall Street workers. These included analysts and the departments that trade securities on behalf of their clients and their employers’ compliance departments who looked the other way on the LAWS against analysts’ getting inside information from the said departments.
For example, if the banking arm told an analyst that a certain company was a takeover target before information in connection therewith was publicly disclosed, the analyst could write a report recommending that his employer’s clients (which ranged from huge pension funds to little investors and everyone in between) buy its stock. That is one kind of insider trading.
In the mid to late 1990’s, the author witnessed various episodes in which one particular analyst at a competing big-name investment bank was manipulating the system. There was circumstantial evidence that he was receiving inside information on the stocks he was touting. Later on, one telecommunications company turned out to be not just “cooking the books” but scorching them. The resulting mess turned out to be the largest accounting-fraud scandal to that date.
These and other Wall Street shenanigans (that were bunched together in the course of a decade!) resulted in the usual harm to society and more excessive wealth for the wealthy; more specifically:
- The perpetrators (the offending workers and their employers) got a “slap on the wrist” in the form of chump-change fines from regulators, while collecting excessively large fees for servicing the merger transactions and advising their clients on what to trade when– while admitting no wrongdoing;
- The mergers resulted in massive layoffs of working-class people;
- Taxpayers paid for the salaries of the regulators who bragged about how great they were in catching and punishing the few white-collar criminals they did nab; and
- Unsurprisingly, the author retired before he got nabbed but he claimed his employment contract contained no pay-for-performance provision with regard to his employer’s investment-banking revenues.
Anyway, read the book to learn a boatload more about Wall Street’s goings-on in telecommunications from the 1990’s into the single-digit 2000’s, and the author’s career.