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November 1, 2002

Arthur Levitt's Revenge: Take on the Street

By Gregory Bresiger

Also in this article

What Wall Street and Corporate America Don't Want You to Know. What You Can Do to Fight Back

by Arthur Levitt with Paula Dwyer

(Pantheon, New York, 338 pages) $24.95

Reviewed by Gregory Bresiger

If you like pro wrestling, try this book. Arthur Levitt, with more than 40 years in the securities business, in these pages tries to put a full nelson on the industry in which he has spent most of his life.

He's upset with the big wirehouses and their investment banking operations. He body slams many of the big shots of the business, contending that they have often acted without regard for the average investor.

What will make this a page-turner on Wall Street is Levitt's persistent habit of naming some of the biggest names in the business. Among those bloodied are Nasdaq's Wick Simmons, Merrill's Dan Tully and Citigroup's Sandy Weill. The last named was Levitt's former partner in Weill's first brokerage back in the 1960s. Back then Levitt's main claim to fame was he was the son of a longtime controller of the state of New York, a liberal Republican with a spotless record of public service.

The Pols

The meat of this book is Levitt's relentless skewering of the securities and the trading industries, although he keeps plenty of vitriol on hand for the pols who were supposed to write laws for these industries and make sure those laws were obeyed.

Indeed, Levitt's disgust with pols probably began when his father, in 1978, was abused by then New York City Mayor Ed Koch. According to Levitt, Koch demanded his father use state pension funds to save the city from yet another potential fiscal crisis that our venal city seems to go through at least once every 20 years (As I write this, the city faces another fiscal disaster. The more things change...).

Levitt's father refused Koch's demand, believing it would be a breach of his obligations as a trustee of the state fund. Mayor Koch, Levitt writes, screamed that, if the city went bankrupt, the responsibility would be the controller's. (Why it was never the fault of pols who used accounting gimmicks for decades here in the Rancid Apple is something that no one has ever explained to me!)

"This confrontation," Levitt continues, "upset my father so much that, moments later, he suffered a minor stroke, which left him unable to speak for several hours." (page 4)

Luckily, the father recovered. But the incident obviously left a scar with young Levitt. He was learning a painful lesson. Politicians, especially when money and power are at stake, are not nice people. But worse was to come. As a regulator, the younger Levitt would find many of these same pols trying to subvert securities laws.

Levitt believes many of these laws were, and, in many cases, remain a joke; that the average retail investor is rooked. Levitt spoke out against various practices back in the 1970s in a speech called "Profits and Professionalism."