Has it Been 37 Years, Really?

Oh, looky folks, here's a paperback ($2.25) copy of The Bankers, by Martin Mayer, copyright 1974 (mine is a 1977 reprint, with a 1977 introduction).  This is a book that I without irony as thee gold standard of its time for a popular-audience discussion of banking issues (he did a reprise in 1997 which I'm a bit embarrassed to say I've never read).

I can't say I've reread every word of the earlier version earlier, but a skim of the index is enough to give you a hint of how much banking has changed.  There is, of course, no entry for Alan Greenspan, Jamie Dimond, Robert Rubin.  There's no entry for "proprietary trading (did the phrase even exist them?)--more surprising,  none for "investment banking."

I don't mean any disrespect to Mayer here, but these insights do just begin to suggest how much banking has changed over the past generation.   Mayer opens the book with a chapter called "The revolution," but its main purpose appears to be to suggest just how dull banking was, and perhaps was supposed to be: Mayer retells the anecdote of the old banker asked to name the most important change he had seen in half a century of bankruptcy--he answered "air conditioning") (shades of Paul Volcker's crack that the greatest financial innovation of the modern age was the ATM machine).  Perhaps the only hint in this intro of what is to come is Mayer's description of the Walter Wriston (then head of National City Bank) as "a man who radiates nervous energy."

There are a few harbingers of what is to come.  There are excellent discussions of the Penn Central debacle, including a mention of the highly ahem equivocal role played by Goldman Sachs.   It's one of only two mentions of Goldman in the book (the other has to do with securities trading in the 20s; in both, Goldman comes off with egg on its face, as amply documented more recently in William Cohan's admirable history of the firm).  There's an intelligent discussion of Franklin National, the largest bank failure in the 20th Century up to its time (1974).

Perhaps more familiar to the modern ear will be the discussion of Saloman Brothers (remember): how they borrow(ed) every last clacker of government money they could lay their hands on, and repurpose it unconstrained by such niceties of reserve requirements.  This was. of course, before Lew Ranieri at Salomon more or less invented securitization--and long before Paul Mozer nearly brought the whole temple down on his head.  Tantalizing for its promise, but not fully developed, is his discussion of "bought money"--what Mayer himself later popularized as the shift from  "asset management" to "liabilities management."  Here perhaps we have a glimmer of the dynamic vortex that it appears we must all live in today.

Mayer isn't perfect.  He tends to wander and to ride his own hobbyhorses at the expense of a more measured presentation.  And perhaps needless to say, if anyone were to assign this to you next semester as a textbook on modern banking, you'd want to find yourself another instructor.  But as perspective, as context on where we are today, it is an unbeatable recofrd of where we have come from.

Per Wiki, I surmise that Mayer is 83, and still active: he's up at the website of the Brookings Institution; here is his most recent Brookings post..  Here's a fairly recent interview.