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The Megabanks Mess (Kindle Single) by [Allison, Herbert M.]
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The Megabanks Mess (Kindle Single) Kindle Edition

3.6 out of 5 stars 16 customer reviews

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Kindle, May 17, 2011
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Length: 48 pages Enhanced Typesetting: Enabled Page Flip: Enabled

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Editorial Reviews Review

In late 2008, every major American bank would have failed if not for the assistance of the federal government. And yet today banks still act with the same single-minded pursuit of profit that fueled the great recession. In this Kindle Single, Herbert Allison, former president of a Wall Street investment bank, reveals how America’s largest banks put their own interests above their client’s interest, how they quietly siphon half of an individual’s long-term savings, how they mine client information and convert it into profits through trading and advising activities, and how their business models periodically jeopardize their own survival while imposing huge losses on clients, shareholders, and the public. Allison also offers an 11-point plan to fix our banks. His common-sense solutions are sure to enrage bank leaders, while his exposure of bank business practices may leave readers with a certain disdain for megabanks. --Paul Diamond

Product Details

  • File Size: 269 KB
  • Print Length: 48 pages
  • Publication Date: May 17, 2011
  • Language: English
  • ASIN: B0051GQX1I
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Not Enabled
  • Lending: Not Enabled
  • Enhanced Typesetting: Enabled
  • Amazon Best Sellers Rank: #723,181 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

Top Customer Reviews

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The author presents how the current banking system has evolved into the `too-big-to-fail' system, how that is a problem that STILL needs fixing, and his view on what needs to be done.

His essay is very suited to the Amazon `single' format (at around 1100 Kindle locations)--the author was able to give background information, describe the problem as he sees it, and give opinions on how to fix the problems--but does not go into the specifics of detailed fixes--as that would be way beyond a 'single'.

He starts with a review of the evolution of the financial/banking industry from the 1970s onward, including pressures that arose from stagflation and the changes due to deregulation--going through the repeal of the Glass-Stegall act and the eventual expansion of financial firms outside previously delineated limits.

He also reviews some of the other pressures resulting in the subsequent`mess', including the flaws inherent in the new system with it's focus on short term measures and profits, ever evolving complexity, and without necessarily considering the fiduciary duty to the clients of the new fiscal giants.

The author also discusses the flaws inherent in the current governance of the so-called megabanks and/or financial services industry including a loss of oversight by ineffective, uninvolved or conflict of interest laden Board of Directors.

He moves on to describe how the industry itself could change, however he rapidly discounts the industry's willingness or ability to do so.

The author then moves on to how government may/should need to step in.
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This book offers remarkable insight into the development, that is, the over-development, of the financial services industry in the post-war period, to the point where there is more megabank risk that can be managed. In a clear and straightforward presentation, Allison, a former top executive of investment bank Merrill Lynch, states his case for radical change, and for a return to the time before the repeal of Glass-Steagall, prescribing much higher levels of accountability and realigned incentive systems less in favor of top executives and bank boards. Some would argue that the governance of large financial institutions has been hijacked by an insular few, and that bank cultures have been corrupted over time. He seems to agree. He also argues that the size of the megabanks offers a false sense of security and strength, and that the assets have grown complex beyond imagination and dangerously mismatched with liabilities, and that successful management of such complex institutions under current goverance is nearly impossible (the unforgettable instance of CEO Charlie Prince wanting to dance until the music stops, is cited). He outlines new business models for retail and capital markets, and sets forth eleven specific proposals for transforming the megabanks. His keen insight and direct call to action are worth taking seriously not only because they seem so full of common sense, but also because of his long and broad experience in the securities field, investment banking, money management, and government regulation and finance. In my view, his recommendation that corporate control be shifted back towards shareholders, whereby they can much more easily challenge existing governance, and more readily propose and elect slates of directors to serve independently of top management, hits the bullseye. It is a fine day in America when a corporate veteran stands up for a seachange in our financial system. This book should be required reading in Washington, D.C.
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By blank on June 2, 2011
Mr. Allison's writing style is terrific. He was able to write with an incredible grasp of history and facts the lay person (or even seasoned financial services professional) may not be fully aware of, yet do so in such an understandable and easy to read fashion. The reader can quickly understand how the "mess" unfolded. More importantly, those within the financial services industry should take away from his work how losing sight of serving clients as a first priority can ripple into results with such a profound impact on an industry central to our national economy and stability.

The material on corporate governance should be a wake-up call for boards in the financial industry and others. While pointedly relevant for board members and executives of financial services firms, the material should also be read by every finance or business student - and would make a great foundation for student case studies or industry corrective action plans as a part of their course work. As Mr. Allison indicates in the outset of the material, one hopes this serves to stimulate dialogue on this important subject in the corridors of the largest financial services firms, in Congress and among the press.
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Instead of providing any fresh insights on the causes of the financial crisis, Herbert Allison offers a children's narrative filled with now-familiar villains: the banks, lackadaisical regulators, and complicit ratings agencies. Everything contained in this slim volume can be found elsewhere, with greater clarity. (In particular, Matt Taibbi's "Griftopia" and Robert Scheer's "The Great American Stick-Up" do a particularly effective job laying out the causes of the crisis to the uninitiated.)

Allison laments the erosion of shareholder power over Wall Street banks, yet fails to account for the fact that if shareholders truly feel dispossessed, they need simply cast their dollar-votes elsewhere. Instead, the reader is subjected to a series of unimaginative prescriptions to reform Wall Street, including breaking up the big banks, strengthening the role of government regulation, and insisting that banks measure performance not through traditional profit metrics, but through subjective designations such as employee and customer satisfaction. In doing so, he fails to explain why presumably dissatisfied customers and employees appear to continue working for the banks today, and why they are contributing to a profit-making environment. Are we to believe that all of the banks' profits are the result of accounting tricks?

Unfortunately, Allison's book contributes little to the growing corpus of historical examination and policy recommendation surrounding the events of the past several years. The wholly derivative nature of this text and its Pollyanna conclusions are just enough to give the reader an idea of what a more thought-provoking epistle would look like.
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