Investment-history

I agree that the story is sad and the author got the short end. That said, this isn't the Greek Tragedy that some seem to imply, nor is it a realistic account of David versus Goliath in the strictest sense.

First, Mr. Schooley brought much of the mess on himself. Not for raising the issues and bringing them to the attention of Merrill Lynch's management, but for hiding behind a facade of ethics and integrity while refusing to meet the company's internal investigators half way. Would that have compromised his ethics or integrity? I don't believe so.

Merrill Lynch's first responses seemed to include a sincere effort to resolve the complaints to the satisfaction of all. While Mr. Schooley refused to budge from his demands which he claims were based on integrity, he also had strange ideas about integrity. While he was rolling dice with his family's future by rocking the boat, he neglected to let his wife in on what he was doing. That is deceit, not integrity and is only different from adultery is degree.

Second, this book is supposed to be evidence placed in the court of public opinion. Yes, the public will side with Mr. Schooley because we always root for the underdog and he was treated unfairly. If he thinks that this book will make a difference in Merrill Lynch's bottom line I contend that he's naive. The public will do what the public does. They'll feel sorry for him, but will not hesitate for a second to follow Merrill Lynch's investment advice if it'll make them money. That's the way life works.

Third, I take issue with the claims made by Mr. Schooley and the attorney who wrote the forward that arbitration is a bad thing. From personal experience I think arbitration is useful, especially in our society where we litigate at the drop of the hat. Of course an attorney is going to oppose arbitration because in most suits the only winners are the attorneys.

I do recommend this book because does have lessons to be learned. What those lessons mean is up to you. The story reads well in spite of bogging down in places in the beginning. It has the usual metaphors reported by others: Greek tragedy, Biblical David versus Goliath, and the more philosophical Good vs. Evil. It even has a bit of Karmic irony. After Mr. Schooley's life started falling apart which included a divorce his ex-wife went to work for Merrill Lynch. What it doesn't have is anything that will cause the same outrage as the Enron debacle. You'll have to look elsewhere for that kind of story.

What happens if a stand-up kind of guy decides to follow the written code of ethics in his brokerage firm? Welll, the result is as if you sent a cub scout to join a den of vipers.

Keith Schooley, tired of the rollercoaster world of oil investing in Oklahoma, turned his hardworking skills to brokering for Merrill Lynch. He did well on all his exams, he was one of the top 10 rookie producers for his area. He read all the required codes of behavior and ethics as set down by the brokerage industry, and monitored by the SEC and the NSAD, the internal brokerage self-regulating body.

Schooley soon found out that his office co-workers and supervisors were playing a bit fast and loose with their own guidelines in order to pass exams and win contests. When Schooley notified Merrill Lynch of violations of the ethics code as set down in their own documentation, his findings were hardly received with cries of joy. Rather, a cover-up on the scale of the Watergate break-in resulted.

While the violations that Schooley uncovered were not of the type that got Michael Milliken and Ivan Boesky in trouble, they were disturbing. Financial institutions hold themselves to a strict code (theoretically) of behavior because they deal with other people's money. This is why the words "fidelity" and "fiduciary" and "trust" are adjectives in so many financial institution names. Their self-regulating bodies and the SEC are supposed to watch over their activities and punish unacceptable behavior. But "quis custodiet custodes ipsos?" or "who's watching the watchers?" The effectiveness of the self-regulating NSAD was a bit like asking the mastiff to guard the roast.

Schooley became obsessed with getting justice and setting things to rights. He ended up escalating the incidents to the point where his entire life was consumed.

What's interesting about this book is NOT the nature of the scandal; frankly this is small beans compared to some of the violations we've seen in the courts. What is interesting is the peek into the inner world of a regional brokerage office. The culture encourages contests "pour le sport" that is, just for the joy of winning; the prizes were nothing these guys couldn't have put on their platinum cards. The contests were a way to one-up the next guy and for the bigger bosses to enrich their bonuses. As far as taking care of the customer, including doing all in the customer's best interest and fully informing a client about the financial products they were investing in, that was not even a consideration. As one supervisor put it "Just sell."

Why read this book? The arbitration proceedings, which form a greater part of the book, are interesting to see how these guys operate. The view into a brokerage office will make you think again about the trust and faith you may be putting in your own broker. More Latin: Caveat Emptor (Buyer Beware.)

Memoirs are necessarily selective and subjective. They simply cannot cover everything as they share the thoughts and feelings as well as the perspectives and opinions of their author. to the extent that author wishes to share them (selectively). My own experience suggests that, in the "alley" of contemporary business, most of the "cats" are gray. It is therefore important to keep in mind that this is Schooley's account of what he believes happened...and did not happen...during his association with Merrill Lynch and thereafter. To his credit, he draws upon as many primary and secondary sources as possible to establish what he calls the "record," one which "can speak for itself."

What does it say? First, that an earnest, eager, and ambitious young man went to work for Merrill Lynch with the proverbial "high hopes" and "great expectations"; by the time he concluded his relationship, he had lost all respect for Merrill Lynch's organizational integrity. In this book, he explains why. Also, various circumstances and developments forced him to conduct rigorous soul-searching. Was he naive? Were his requests unreasonable? Should he have conducted himself differently? Was it all worth it to challenge such a large and powerful organization? Schooley responds to these and other questions in his book. Finally, the book says (to me at least) that it is difficult but not impossible for an individual to initiate and then sustain such a challenge. Perilous? Of course. Doomed to failure? Not necessarily.

Dante reserved the last (and worst) ring in hell for those who, in a moral crisis, preserve their neutrality. According to Schooley, there were many senior-level executives within the Merrill Lynch organization who did so as did officials at various regulatory agencies. I admire Schooley's efforts to act upon his principles when he composed a memorandum for Merrill Lynch's senior managers, informing them of various improprieties and possible illegalities as well as efforts to conceal them. I admire his efforts even more after he was dismissed and then threatened with litigation unless he remained silent (i.e. preserving his neutrality). His personal as well as professional sacrifices were numerous and substantial. Nonetheless, he persevered.

As Schooley's reader, I have no reason to question his sincerity or integrity and am unqualified to comment on the merits of his allegations. Nor do I presume to suggest that his book will achieve all of the objectives he had in mind when he wrote it. (Organizations as large and complicated as Merrill Lynch remind me of the fact that "jumbo" oil tankers must travel approximately 30 miles to reverse their direction.) I rate this book so highly because I think it raises a number of questions which must be addressed by senior-level corporate executives, especially now as other allegations are made by other Schooleys in their respective organizations. Schooley obviously believes that our society needs more "white cats" and fewer "black "cats," not only in the private sector but in publicly-funded regulatory agencies which have fiduciary responsibility to all citizens. Within the limitations of the memoir genre, I think this is a brilliant achievement.

Readable account of the Orange County financial blow-up. Particularly interesting is the description of Robert Citron, the hapless college dropout who controlled billions of dollars of public money. Also fascinating are the prescient comments of the obscure accountant who ran against unbeatable Citron in the election prior to the disaster. Jorion manages to educate the reader, in a very painless way, about the institutions of the bond market (such as repos).

On the minus side, the book is not particularly well documented (in terms of, for example, the graphs and the sources of the data) and some chapters seem suspiciously like lecture notes, hastily adapted to a book format. Still, an enjoyable trip to the dark side of financial market.

This book tells the story of a 1.4 billion$ financial loss by the Orange County municipality.
The author explains very clearly what happened.
The municipality, through its treasurer, speculated that interest rates would stay the same or fall. Into the bargain, he leveraged his position with a factor 3. The means for the speculation were repos on bonds.

When the interest rates went through the roof (from 5,25% to 8% = + 52%), the value of the collateral (the bonds) for his position fell (with a factor 3). He got a margin call, but couldn't pay it. The biggest part of the investment (held by FBCS) was liquidated with a phenomenal loss. Only Merrill Lynch didn't cover their position.

The author gives excellent explanations on some very specialized investments like reverse floaters and other high tech financial operations of which the value can only calculated by partial integrals.

Food for investment bankers.

Jorion should be commended for his insightful, first-class treatment of this history making event. Big Bets... is a fast, fluid read that is devoid of technical terms and is written in an active, conversational and explanatory voice that the typical layman can readily understand. In this book, which reads more like gripping fiction, we are treated to an excellent character sketch of the key culprit in the Orange county financial fiasco, Robert L. Citron, his rise to power, the environment he worked in, the exotic financial tools he carelessly wielded, an unforgettable cast of financial hucksters and ill-advised power wielding greedy misfits, and the ultimate downfall of the Orange county financial safety net and its after-effects.

From this book, we learn that Robert L. Citron was head of a large portfolio, had no oversight, and an inflated ego. His superiors and fellow investment participants (such as the county school district) knew full well what he was doing, but allowed him to continue unsupervised because of his past stellar performance- much of which was due to pure luck and favorable market conditions. We also learn that Citron, much like Nicholas Leeson, the orchestrator of the fall of Barings, was a financial neophyte. While on the one hand believing that he was fully invested in bonds, Citron had taken a heavily leveraged position in very exotic derivative securities, proving to Jorion's point that he really did not have a clue as to what he was doing.

We also learn that Citron (nor the people above him and his investment participants), who had no real background in finance, did not know the difference between market price and face value, nor did he know the difference between an option on an asset and the outright ownership of an asset. Based on one very bad bet on the movement of interest rates, Citron fully invested Orange County's finances in derivative securities that he did not understand at all, and compounded the problem by leveraging his position (basically using a little money to borrow a lot of money) to the extreme.

After reading this book, those of us who believe that our investments, from the retirement funds managed for us by fund advisors and our places of work to our bank accounts and our kids' education funds, are safe should have our heads examined. People such as Citron were not financial gurus, that is certain, but as the more recent derivative led failures at hedge fund Long Term Capital Management (which included the two Nobel laureates who literally wrote the book on derivative pricing on its stellar team of rocket scientists) and Bank of America demonstrate, no one is truly safe.

This book has good insights into the Wall Street of the 1960's. This was the period of time most similar to the present (not identical) regarding the boom in tech stocks and new issues. Brooks has some interesting insights into the players in that period of time and what went wrong.

"The Go-Go Years" is a largely a collection of New Yorker magazine articles (and some pieces written especially for the book) by John Brooks, who in it covers a crucial period in the history of Wall Street, the 1960s, which includes the rise of conglomerates, mutual funds, and hedge funds, i.e. players at the heart of our economic situation today. Reading this book is instructive for that alone.

But the book is far more than a prescient account of today's market forces. It's a vivid rogues gallery of people who rode the tides of fortune, had their days at the crest of their profession, and then fell back. Some, like stockpicker extraordinaire Gerald Tsai, the first Asian to rise to NYSE prominence, were undone by fortune and circumstance. Other less savory characters had only themselves to blame.

There's an early look at Ross Perot, described vividly at the book's outset as losing a half-billion in a single day (April 22, 1970) and more or less shrugging it off. Perot's priorities were solid and he knew what he was about. Not so Eddie Gilbert, "The Last Gatsby" as Brooks calls him, who parlays small victories into outrageous defeats, dragging along a coterie of privileged friends into more and more nefarious investment schemes. Brooks sees Gilbert's get-rich-quick attitude as too emblematic of Wall Street in the 1960s, and his narrative never tires of pointing these out.

Brooks' elegant prose has a way of leaping out at you without disrupting the narrative flow. About the trend for all investment strategy to come unglued: "The dumb money could take bitter comfort in the company it had among the smartest of the smart money - or former money." On Tsai: "...so swift and nimble in getting into and out of specific stocks that his relations with them, far from resembling a marriage or even a companionate marriage, were more often like that of a roué with a chorus line." On the numerous bailouts undertaken by the Street as the '60s went sour: "Save the broker in order to serve the customer: it was Wall Street's version of the trickle-down theory."

Brooks's writing feels timeless. His is a lapidary style of almost accidental eloquence, blending facts in a seamless way as he tells his tale. It's like Roger Angell's baseball writings for the same magazine - I kept thinking about Angell's great essays in "The Summer Game," which focuses on roughly the same period as "The Go-Go Years," albeit on a different sport.

While Brooks's disapproval with Wall Street in the 1960s is obvious, and his genteel liberal disdain for a status quo that allows the market to manage itself shows up now and again, he never loses his focus on the people, and allows them to breathe in his narrative. He doesn't quote from them much, but he obviously spoke to many of the principals at length and weaves their insights into the story. As much as the then-nascent trend toward conglomeratization bothers him, he allows himself to show some sympathy for one of its more outrageous practitioners, Saul Steinberg, who in one of the best chapters finds himself thwarted by the bluebloods while attempting to acquire Chemical Bank. "I always knew there was an Establishment - I just used to think I was a part of it," Steinberg says.

It's not a connect-the-dots style history of Wall Street in the 1960s. It's too episodic for that. But if you are studying the facts and figures of the Go-Go Years and want a deeper look, or simply enjoy the human drama all-too-often overlooked in American business journalism, "The Go-Go Years" is a book that has only appreciated in value over time.

Wiley Investment Classics typically fall into two categories, fascinating troves of banking wisdom that are well-written and insightful, and painful diatribes that while full of good intention are best put on the shelf for display. "The Go-Go Years" is definitely the former - this is an incredibly well written book about what has really become one of the forgotten times in American financial history. While the booom of the 1920's and resulting crash, as well as the excess of the 1980's are frequent subjects of many financial authors, Brooks has picked a relatively infrequently discussed portion of our financial history, the booming 1960's and the resulting crash of the early 1970's.

There are many outstanding sections of the book; the introduction to Ross Perot in the first chapter, the history of Gerald Tsai and Fidelity, the rise and fall of the conglomerates, the description of the back-office and its staff, and finally the description of Wall Street that begins Chapter 5, which is without question the best description of the area ever written. These few pages (104 - 111) are simply an outstanding piece of prose.

There are just too many good things about this book to fit into a 1,000 word review. Too many of the lessons from only 40 years ago are maddeningly similar to the lessons many dot-com and IPO investors are learning now, and the structure and actions of many Wall Street establishments are all too easily explained with this simple peace of previously "missing" history. If you are up to date on the current view of the 1929 collapse, and the bull market of the 1980's, then this is the book that goes a long way towards filling out the major events that shaped the markets in the interim.

Go read this book.

Favorite Excerpts:

"Goaded by stock underwriters eager for commissions or a piece of the action owners of family businesses from coast to coast - laundry chains, soap-dish manfacturers, anything - would sell stock in their enterprises on the strength of little but bad news and big promises." - Brooks (page 28)

"Some accused him of being a habitual liar; they forgave him because he seemed geniunely to believe his lies, especially those about himself and his past." - Brooks (page 63)

"In the nineteen twenties, Wall Street's last great era before the present one, it was a kind of super university as well as a marketplace." - Brooks (page 105)

"'We were all sheep,' one of them would admit, sheepishly, years later." - Brooks (page 120)

"A smooth operator with a streak of the gambler; a company more interested in attracting investors than in making real profits; the resort to tricky accounting; the eager complicity of long-established, supposedly conservative investing institutions; the desperation plunge in a gambling casino at the last minute; the need for massive central-banking action to localize the disaster; and finally, reform measures instituted too late - we will see all of these elements reproduced with uncanny faithfulness in United States financial scandals and mishaps later in the nineteen sixties." (page 125 - 126)

"Economics have never been my strongpoint" - Salinger (page 273)

The terms "Upheavals" and "Market Shock" should not be used to describe the subject matter in this book since it consists entirely of slow, gradual changes in demographics. These changes are only discussed in the most general of terms. There is not one chart or graph in this book. The lack of a timeline makes it impossible to do any serious financial planning. Most of these changes will not have a major effect on the U.S. economy until after most of us are dead and buried.

Unfortunately, the financial advice in this book is very limited, consisting mainly of common sense items, such as, "Learn to broil a trout." The useful information in each chapter can be summed up in one sentence: Chapter 1: Americans are aging. They will need health care and retirement homes. Chapter 2: Science is cool, but make sure that a lot of people will pay for it before investing. Chapter 3: Mutual fund fees are too high. (Also contains the crazy theory that all funds will collapse when people figure out they are not FDIC insured.) Chapter 4: One day, white people will be the minority in America. Chapter 5: The Japanese are getting older, too. Chapter 6: Europe needs Euro-denominated junk bonds. Chapter 7:China has a tough row to hoe. Chapter 8: The crime rate will rise. Chapter 9: There's that global warming thing.

I would recommend this book to anyone who enjoys historical trivia. On the one hand, I read every page in this book. On the other hand, I don't expect to ever make a dime off of anything that I learned.

We all see the changes that are taking place around us (such as the graying of America). This book takes those changes and puts them into perspective with actionable information. I kept slapping my forehead and saying, "I know this, why didn't I see where it leads?" Buchholz makes sense out of our everyday observations and puts them into economic context.

A rare book on the economy that is actually interesting and fun to read. Buchholz has taken a very clever approach to making his point (with mini-novellas) that are both insightful and well researched. And humourous. Raises some serious concerns about the not too distant future that we should all be looking at as we contemplate our next investment.

I've read several Enron books, from Cruver's poor product to Lynn Brewer's silly treatise, and I have to say that this one is probably more accurate and balanced than any of the others, but..... it's a real snorefest. Any author that can take a fascinating story like this and put a reader to sleep with it is not really overachieving in my view.

I guess Fox couldn't get anyone significant to talk to him and maybe that held him back some, but it didn't keep Cruver and Brewer and Swartz from producing more entertaining stuff in their efforts which were similarly unencumbered by input from people who were really making it happen. Oh well, he produced a "fair and balanced" treatment that just might help you with that insomnia thing.

This book, plus "24 Days," together tell you everything you need to know about the fall of Enron. This one covers the "rise" better, that one covers the "fall."

What one ought to take away from both books is the realization that, despite the failure and indeed despite the evident criminality, Enron (as Fox says in his epilogue), "wasn't a complete hoax. The company deserved admiration for its early forays into trading gas and electricity, and for its plunge into the innovative financing of energy projects. It out-maneuvered the old-line energy companies to expand the use of derivatives in the energy industry. This introduced new ways of managing risk, which lowered the costs of energy-related transactions for an array of businesses."

Another reviewer has said that the Fox book is a cure for insomnia. The fact is that if you need to have material on Enron MADE interesting for you by dramatic presentation, by a well-shaped narative flow, then you may have trouble with Fox, simply because he lets the material speak for itself.

Sometimes it speaks in ambiguous tones.

Good, solid background on the history of Enron and its missteps. If you're interested in one stop shopping for an understanding of Enron the corporation from start to finish, this is the best out there so far.

This book, rich with wonderful old photos, gives a concise history of the last 100 years of the financial culture that has come to be known as Wall Street. A good blend of text, photos, and charts make this book interesting to the non-financial reader.

The author divided the book into decades and each chapter outlined the changes that occurred over those years.

At the beginning of the last century, Wall Street was known for its lack of financial regulation regarding trades. Scandals and outright swindles abounded. Four years after the Crash of 1929, FDR's administration passed nationwide banking and securities laws to make sure that this kind of disaster did not happen again.

Unfortunately, the real and distasteful inner workings of Wall Street were revealed in the Senate hearings. An SEC commissioner called investment bankers "financial termites". This knowledge scared investors away for the next 20 years.

In the early 50s, investing became popular with middle class investors for the first time in a generation, and mutual funds were developed after being gone for 30 years.

The 60s brought the birth of the modern mergers and acquisitions business in the U.S, and the days of small brokerage firms were coming to an end.

The 70s brought extensive reforms concerning commissions while the 80s were the years of junk bonds, insider trading scandals, and the savings and loan crisis.

The author called the 80s the decade of greed and the 90s the decade of boom. The Internet has brought about a totally new way of trading stocks and has made up-to-the-minute financial news available to everyone.

The changes in the last 100 years on Wall Street have been phenomenal, mirroring the technological changes in our society.

Charles R. Geisst's enjoyable book chronicles Wall Street in the twentieth century. He effectively captures the feel of the various boom and bust periods. The clear, informative text is supplemented with incredible black and white photographs of each period's key events and people, making it very evocative and intriguing. We at ... recommend this book to anyone - not only someone in business - who wants to learn about Wall Street's history. It would make a great gift for anyone who works in the financial industry or for a young person who is interested in how money works.

I enjoyed looking at the pictures and reading the headlines. Very educational and informative.

I found the Serpent on the Rock by Kurt Eichenwald extremely compelling and well researched. Through the greed of "low-life, sub-human trash" like James J. Darr and Clifton Stone Harrison, honest and hard working people in this country and abroad, were completely depleted of all their retirement investment and income. What really got my goat is that they both walked away from their billion dollars fraud, scot-free. Darr,this pompous egotistical, arrogant worm, is said to still receives a lifetime pension income, as per his contract with Prudential Securities, ranging in the $200,000 per year. Who said crime doesn't pay. Thanks to the "don't-ever-give-up" attitude of Wayne Klein, William McLucas and the likes, Prudential Insurance was forced after more than a decade, to pay back ...(at least a percentage of it)... the billion dollars stolen from their trusted investors. Bravo guys for a hard job, well done!

This is a story that I missed when it first came out -- but I went back to it after reading Eichenwald's new book, The Informant. This is fabulous -- full of twists and turns, a real legal thriller. The new book is better, but this one still kept me up late at night.

An interesting read, though it has the feel of having been padded a bit, especially at the end when the author veers off into a mildly interesting but irrelevant mini-bio of the the son of the main character. I would rather she had spent more time clearly defining some of the financial shenanigans; I still am not clear on some very major points. I reread them several times, and perhaps they are just beyond me, but the rest of the book dragged because the author tried to build the story on what I thought were some shaky foundations. Perhaps if you're a stock-broket or banker it would be clearer. Also, the main actor in this drama, James Hazen Hyde, seems like such a pampered, spoiled child. Although Beard doesn't convert most of the sums involved into today's dollars, the one or two times that she does provides a basic formula; by that account, poor Mr. Hyde was worth approximately $50 million BEFORE his inheritance. Even if that figure is wrong by half, the letters he wrote to his mother wanting her to foot some of his bills are pretty pathetic. To be fair, this book probably suffered because I had only recently finished DAvid McCullough's THE GREAT BRIDGE.

If you followed Enron, Worldcom, the conspicuous consumptions of Donald Trump or any of the other seamier of capitalism's excesses over the last several decades, this book will show you that history was repeating itself. In fact, comparing the ostentatious displays of wealth and brutal no-holds-barred corporate infighting between then (1900) and now, our capitalists sound like mere echoes of men who defined the terms "Gilded Age" and "Robber Barons."

Patricia Beard, in "After the Ball" has used the events and people surrounding the Equitable Life Assurance Society to illustrate a bygone era of business and living at the top level of wealthy society. In addition to dissecting a nasty takeover corporate takeover attempt well, Ms. Beard writes in a way that holds the reader's attention.

The Equitable was one of the big three life insurance companies at the dawn of the 20th Century. Important to policy holders because life insurance was the only means of support available at the time if the man of the house died with dependants, it was important to Wall Street because the premiums sat in a vast cash pool and were available to finance much of our industrial growth of the period. The Equitable had been created by one man, Henry Hyde, who grew it from a store-front business to vast size in the forty years after the Civil War. Henry Hyde was a founder, a decisive man who knew his business, could make decisions and had the respect of his company officers as well as his fellows.

His son, James Hazen Hyde, had none of his father's characteristics and had not been schooled by his doting parent in the arts that would be necessary to run the Equitable when it was his turn. When Henry died, James, in his early twenties, was the product of money and society -- finishing schools in Paris, the best clubs, debutante balls, and the kingly sport of coach riding. In short, he was trained to compete in the world of Mrs. Astor, not Mr. Astor.

To compensate for these deficiencies, father Henry had established a trust for his son. A vice presidency with the Equitable and the tutelage of James Alexander, President of the company and the man entrusted by the founder to school young James until he could assume the Presidency himself.

Alexander had other ideas. Put off by James Hyde's public and ostentatious lifestyle (including the Hyde Ball, one of the most talked about and over the top dinner productions in an era of societal excess among his class), claiming that it did not befit a corporate leader who could keep the "sacred trust" of a life insurance company, and wanting control of a company he had contributed mightily to, Alexander organized a takeover fight among the board members. His goal was to strip James of control of the Board of Directors and to do it by using James' social prominence against him in a public as well as behind-the-scenes attack.

What ensued was a year long debacle that quickly spun out of control, as first the Alexander side and then the Hyde forces battled for advantage. The board members, financiers like Harriman, Ryan, Morgan, Frick and others backed the side that stood to gain them the greatest advantage in victory. Plans, compromise offers, press leaks, attacks intrigue and back stabbing came forward in a flurry as the fight became very public and enthralled ordinary people (over 100 front page stories in the NY Times in about a year's period). Regulators soon got involved, the NY Legislature, political bosses and any number of money-men, eyeing easy capital if they could assume control. President Theodore Roosevelt worried that the fight would harm the Equitable, dissolve commercial confidence and bring the economy to a grinding halt.

When it was over, neither side got what they wanted or expected, the NY Legislature was spurred into reforming insurance oversight, Charles Evans Hughes was launched on his path to the US Supreme Court and his run for the White House and the Gilded Age (from hindsight) set on a path toward memory.

Beard weaves this corporate intrigue with a biography of James Hazen Hyde. He is the archetypical society man of the Gilded Age, spending on livery, costumed balls, big houses, fast women, a sport very few could even afford to compete in and his love of French culture. She does a good job of entwining the two threads of her book, stumbling only when she sometimes over-lists what various guests were wearing to various parties and engagements. On the whole, she does a good job of painting a picture of life as James Hazen Hyde knew it, and demonstrating that he was both cut from too fine a cloth to effectively run a competitive business and that he wore that cloth too proudly, helping to make his lifestyle a large issue in the corporate meltdown that froze the Equitable as titans battled for control.

The author writes well and generally keeps the pace moving along swiftly. The story weaves many famous business and historical personalities (it was a much smaller world at the top then) into the saga of a now forgotten business drama that held the public in fascination. This is a good book for readers interested in business history as well as viewing the lifestyles of the fabulously wealthy a hundred years ago.

James Hyde, the main character in Patricia Beard's "After the Ball," a fascinating chronicle of the Gilded Age, conceded, "I got too much power when I was young." Shortly after the turn of the century, Hyde appeared to be coasting to glory in charmed young adulthood affluence. In his twenties he owned a brownstone in New York, a house in Paris, a private railroad car, and a four hundred acre estate, The Oaks, on Long Island. Add to the aforementioned that he was Harvard-educated with all the right social connections, was matinee idol handsome, and was a vice president in the Equitable Life Assurance Society, and it becomes easy to see why many sought his company and others were just plain jealous.

Beard's intensely researched work strips the veneer off the visible top layer and reveals that life can be highly disconcerting at the top of society as well. The difference is the battles that are fought, which, considering the stakes, contain a ruthless intensity.

In the Gilded Age of the late nineteenth century, in which James Hyde's father Henry flourished after founding the billion dollar Equitable Life Assurance Society, commercial triumph resulted from truly being in the right place at the right time with the right product. While income disparities were vast, ordinary citizens seeking to make financial ends meet bought life insurance policies to provide their families with security in the face of often rocky existences. The resourceful elder Hyde tapped into this desire. He succeeded so handsomely that big name magnates such as E.H. Harriman and Henry Clay Frick would soon grace Equitable's board of directors.

Henry Hyde died May 2, 1999, a year after his son graduated from Harvard. Young James was convinced that one day he would follow in his father's footsteps after receiving the proper seasoning, and the person designated to provide that assistance was acting president James W. Alexander, a veteran who had worked his way up the Equitable ladder. He would be assisted, it was anticipated, by Gage Tarbell, Equitable's third vice president and head of sales.

The book's title relates to a grand New York ball young Hyde gave on January 31, 1905. At the time this appeared to be the latest stepping stone up the success ladder for the handsome, witty, urbane New York City executive and socialite. One of the evening's guests would be another young New York aristocrat who would marry a cousin less than one year later and ultimately surge to inernational greatness and an enduring place in world history, Franklin Delano Roosevelt.

In a contemporary framework it would appear that perhaps the gifted Hyde would succeed in New York society and beyond in the same manner as Franklin Roosevelt, but whereas the future president was just working his way into the city's and state's limelight with an ultimate focus well beyond those objectives, Henry Hyde's run of bad luck would bear an inverse relationship to the good fortunes of Roosevelt. Before long his company would be immersed in conflict. Alexander and Tarbell would turn on him, while Henry Clay Frick, who chaired an investigation into company activities, would so the same. E.H. Harriman was another formidable force pitted against young Hyde.

While Equitable fell into a comparable pattern of excess and wheeler-dealer activity characteristic of highly competitive New York corporate life, with its agents being provided with excessive advances and state law being violated by selling stocks to companies on whose boards they sat, directing animus against the youngest executive in the ranks appeared to be a case of absolving their own conduct through a designated scapegoat. In the process they also released pent-up jealousies against one of the dashing princes of New York society, who had dated Alice Roosevelt and visited with her and father Theodore in the White House. Hyde was also a friend of the period's most famous actress, Sarah Bernhardt.

Another highly publicized effort, the Armstrong Investigation, headed by Charles Evans Hughes, later to become Attorney General, Secretary of State and Chief Justice of the U.S. Supreme Court, captured many headlines but resulted in no prosecutions. All the same, the damage was done and Hyde relocated to Paris.

A new phase of Hyde's life began in Paris, where he had earlier headed an Equitable office. In the manner of a seasoned aristocrat more characteristic of an ancient British family, Hyde ultimately married three times and cut a wide swath in Parisian society. His only son, Henry, had a large shadow to climb out from under, feeling initially dwarfed by his formidable father. Eventually he emerged from that shadow and achieved marks of distinction initially in the Office of Strategic Services, the forerunner of the CIA, in World War Two, then as a prominent New York-based international lawyer whose client list included prominent film director John Huston.

Patricia Beard is able to provide readers with such a fascinating front row seat in boardrooms, drawing rooms and ballrooms of the period due to her close friendship with the Hyde family. Henry served as godfather to one of her children. The book serves as both an interesting corporate chronicle of the times as well as providing social commentary wherein readers feel a part of the scene, rubbing elbows with the cream of international society.

As with Robert Monk's other books, "The Emperor's Nightingale" tries to make the case for increased shareholder activism, especially by institutional investors. In his earlier works, Monks typically linked shareholder activism to corporate profitability. His earlier works, however, also touched on a broader social agenda. In "The Emperor's Nightingale," that broader social agenda takes center stage. It is a distinctly left-liberal agenda: corporate law compliance, corporate self-flagellation through mandatory disclosure of allegedly improper conduct, environmental protection, workers' rights, etc.

The trouble is that the root claim - that shareholder activism is a good thing - is both positively and normatively flawed. There is some anecdotal evidence that institutions are becoming more active, using the proxy system to defend their interests and influencing policy through negotiations with management. Yet, there is little concrete evidence that shareholder activism matters. Even the most active institutions devote little effort to monitoring management. They rarely conduct proxy solicitations or put forward shareholder proposals. They do not to try to elect representatives to boards of directors.

U.S. public corporations are characterized by a separation of ownership and control: the firm's nominal owners, the shareholders, exercise virtually no control over either day to day operations or long-term policy. Instead, control is vested in the hands of professional managers, who typically own only a small portion of the firm's shares. This separation has costs, the most significant of which are referred to as agency costs, incurred to prevent shirking by managers. The agency cost model forces one to confront the question: who will monitor the monitors? In any team organization, one must have some ultimate monitor who has sufficient incentives to ensure firm productivity without himself having to be monitored. Institutional investors, in Monks' theory, function as such ultimate monitors. Because they own large blocks, and have an incentive to develop specialized expertise in making and monitoring investments, they could hold management accountable for actions that do not promote shareholder welfare, which should lead to a reduction in agency costs.

The benefits of institutional control, however, may come at too high a cost. There is good evidence that bank control of the securities markets has harmed that Japanese and German economies by impeding the development of new businesses. More importantly, there is a risk that institutional investors will abuse their control by self-dealing and other forms of over-reaching. If management becomes more beholden to the interests of large shareholders, it may become less concerned with the welfare of smaller investors. The U.S. experience with social investing by public pension funds, moreover, suggests that politicization of stockownership will be an economic drag. In general, the greater the extent to which a public pension fund is subject to direct political control, the worse its investment returns.

In my view, moreover, the separation of ownership and control is a highly efficient solution to the decisionmaking problems faced by large corporations. Separating ownership and control by vesting decisionmaking authority in a centralized entity distinct from the shareholders is what makes the large public corporation feasible. To be sure, this separation results in the agency cost problem described above. A narrow focus on agency costs, however, easily can distort one's understanding. Corporate managers operate within a pervasive web of accountability mechanisms that substitute for monitoring by residual claimants. Agency costs, in any event, are the inevitable consequence of vesting discretion in someone other than the residual claimant. We could substantially reduce, if not eliminate, agency costs by eliminating discretion; that we do not do so suggests that discretion has substantial virtues.

The root economic argument against shareholder activism thus becomes apparent. Large-scale institutional involvement in corporate decisionmaking seems likely to disrupt the very mechanism that makes the modern public corporation practicable; namely, the centralization of essentially nonreviewable decisionmaking authority in the board of directors. Given the significant virtues of discretion, one ought not lightly interfere with management or the board's decisionmaking authority in the name of accountability. Preservation of managerial discretion should always be the null hypothesis. The separation of ownership and control mandated by U.S. corporate law has precisely that effect.

This was a stimulating and thoughtful analysis by someone who has been a successful capitalist with experience in the innermost sanctum of coporate America. It is amusing to see right wing academics (such as one of the reviewers of this book) stretch to condemn this author (a Republican businessman) for his "liberal agenda." Those who retain some sense of intellectual curiosity will find much to reflect upon here. Those who are comitted apologists for the status quo need not bother with this book.

Monks uses the science of complexity to examine the nature of organizational change. He posits that enterprises are undergoing a phase transition into a system for creating wealth for owners and society. He sees this corporate restoration process as a natural way to order the elements of corporate governance, increasing accountability to long-term owners. The book draws heavily on the new sciences (complexity science, chaos theory, complex adaptive systems) to shed light on the realities of the corporation. The bottom line in these pages is that corporate power is checked and held accountable, not by government or governance, but by the active involvement of institutional investors-pension funds and the like. The author's optimism is considerable in this regard; one only hopes he is right. There is a lot in this book worthy of your time. Overall, this work offers many unique insights and perspectives. Recommended. Reviewed by Gerry Stern, founder, Stern & Associates, author of Stern's Sourcefinder: The Master Directory to HR and Business Management Information & Resources, Stern's CyberSpace SourceFinder, and Stern's Compensation and Benefits SourceFinder.

The Equity Culture: The Story of the Global Stock Market
By B. Mark Smith
Publisher: Farrar Straus & Giroux; 1st edition, Hardcover (August 2003)

B. Mark Smith gives the reader a history and economics refresher in the Equity Culture: the Story of the Global Stock Market. The book, 352 pages, is not hard to read and provides an interesting historical overview of the equity markets. Smith, a former stock trader with FS/Boston and Goldman Sach, is also the author of Toward Rational Exuberance: the Evolution of the Modern Stock Market.

In the Equity Culture, Smith traces equity market activity from the Mississippi Company in the 18th Century to the more academic and sophisticated computer models of today. Through it all, Smith shows the reader that while times may change, human behavior around a rising equity market does not. The real thesis of Smith's book is that equity market bubbles and busts contain three consistent historical trends(1) a new product or development; (2) increased purchasing activity by professional investors in the company or companies selling or providing the new product or development followed by investment by an expanding pool of inexperienced investors; and, (3) easy credit. Each significant downturn in an equity market, from the Romans to the recent technology bust, are preceded by these market elements, according to Smith.

The Equity Culture provides an interesting and wide angle view of the seemingly senseless ups and downs of the equity markets. The book is no novel, but Smith makes what most would consider a pretty dry subject an interesting read. For market veterans, the book provides good perspective; for market rookies a good lessen: look out!!

I monitor stock prices daily as part of my job, and to fuel my personal investment decisions -- needless to say, I am far from being alone. Yet only decades ago, stocks were clearly not that important for the majority. What has happened? What is happening? This book traces the history of stock from as far as the Roman Empire to modern days through the Middle-Ages.
This book explains that although stocks have been around for a long time, only quite recently have they been so widely used, and only recently have stock prices had such an influence on every major country's economy around the world. A great, well-documented perspective on today's stock-centric economy, and a highly suggested read for anyone dealing with stocks in any way.

B. Mark Smith has provided in The Equity Culture a readable account of the evolution of the global equity market. Emphasis on the word global. This is not the history of the U.S. stock market, or what he later refers to as the Anglo-American market, but an account of equity markets in Japan, Germany, Malaysia, and elsewhere, though invariably much of the focus is on Japan, the U.S., the U.K. and Germany. He is very good at weaving into his story the role of market theory from Markowitz on portfolio theory to more recent debates on the efficient market theory (the latter frankly I don't understand). Readers will also find here a more sophisticated treatments of so-called market "bubbles." In my view, he correctly limits the standard explanation of such events to stock markets that are sufficiently developed, or left un-regulated; hence, the so-called Japanese "bubble" is not a case of investors acting on emotion rather than reason because government policy had institutionalized high values.

This is an excellent overview, and he is to be commended for managing to avoid the temptation to stray too far from the main story line. After all any number of tributary topics he covers might well themselves provide the basis of another volume -- including, the role of central banks in crisis periods, the growing influx of pension dollars into equity markets, the co-variance of global markets and, of course, the recurring problem, most recently manifested by Enron and the Italian holding company, Parmalatt(?), of efforts to conceal losses through accounting machinations (see Japan's version in the discussion of Sanyo Special Steel (184-185). I think there is a small error regarding the U.S. crash and that is that "Black Tuesday" was October, not November 29th (see page 126), 1929. Not a big mistake when one bears in mind Galbraith's comment that the singular feature of the crash of 1929 was that the "worst continued to worsen." Overall, an excellent, very readable introduction to the global evolution of equity markets. Stay tuned, though, this history continues to evolve.....