First, Levitt is right that many wirehouses usually favor themselves over the individual investor and give institutions better treatment. But he acts as though the average investor will never learn this and there are no alternatives to their conflict-of-interest model.
But there are plenty of Vanguards in the investing world. And many investors want to go it alone or find an independent advisor free from obvious conflicts of interest. It is becoming ever easier for the average person-if he or she takes a little time and does a wee bit of research-to find the right advisor or no advisor. More than a few investors are smarter than Levitt assumes.
Second, there is a question about the regulatory saviors. Does the system of regulation work, even when the best of regulators is running the show? Going through Levitt's litany of complaints one starts asking: Why couldn't the sagacious Levitt and his staff do better? He was chairman of the SEC throughout most of the 1990s. He was a smart regulator who knew all the games that were being played.
In his book, he claims he saw most of the reporting and accounting scandals coming. So why didn't he scream bloody murder? He might have had little influence with the self-serving porkbarrelers on Capitol Hill, but some of the media would have been delighted to hear his complaints.
Arthur Levitt is not a happy man. One has a sense that this book is almost a form of therapy for a frustrated former regulator. Throughout the book-as Levitt listed this incredible litany of what he believed to be shady practices carried out in the industry he worked in and later regulated, or tried to regulate-a profound sense of frustration keeps resurfacing.
Despite his best efforts, the scandals exploded just after he left office. His ill-starred successor coddled many who greased the bubble's wheels and makes an inviting target. So blame it on the shady securities business. Blame it on anyone or everyone. Blame it on Rio, but don't blame me, Levitt seems to be saying. But most of the shenanigans occurred on his watch.
But, one is obliged to ask, why weren't there louder public outcries from Levitt about accounting hijinks? And why, given his long record as a player in the securities industry, couldn't he make a more effective case with the pols on Capitol Hill, so many of whom seemed to have been antagonistic to Levitt and his call for reforms? Why couldn't this veteran of the political wars build a constituency among the pols?
This book is a call for reform. But it is also the chronicle of disappointment-of a regulator jaded by the securities business.
Levitt has done too good a job with this book. Yes, he's wounded a lot of those in the securities and political worlds. He's exposed some of the seedy practices of the business. But he's also unintentionally wounded the system of regulation by chronicling his own failures. Maybe in the end, the forces of human nature like greed and fear are simply too powerful for legalistic regulations to totally resolve.