December 2002

Take on the Street: What Wall Street and Corporate America Don’t Want You to Know

By Arthur Levitt

Pantheon Books, 2002, $24.95,
ISBN: 0375421785

Reviewed by Ned Regan

The details of recent corporate wrongdoing, earnings manipulation, and audit failures are well known. What famous former SEC Chairman Arthur Levitt offers in his book, Take on the Street: What Wall Street and Corporate America Don’t Want You to Know, is this: on-the-spot observations, pointed commentary, and recounting of battles with self-serving and well-funded adversaries, told in a way that will fascinate even veteran market participants.

Never has such a primer of market knowledge, laced with facts, insights, and, above all, rich experiences, been available. Levitt was there at every recent market and regulatory turning point—as head of his own Wall Street firm, as CEO of the American Stock Exchange, and as the longest-serving SEC chairman in U.S history.

In Take on the Street, two decades of exciting and troublesome financial history come alive. The fight over stock-option expensing, Congressional cutting of SEC staff to curb investigations, and corporate earnings manipulations are all recounted in lively prose. Levitt’s successful attempts to lessen accounting industry domination over FASB rule-making are also highlighted.

Levitt says that his book is all about “the collision of all the unhealthy attitudes, practices, and conflicts of Wall Street and corporate America.” But the protagonist of Take on the Street is not necessarily the market, it is the individual investor, the “little guy”—a focus the author presumably inherited from his father, Arthur Levitt Sr., who preceded me as New York State Comptroller. The following is Arthur Levitt’s announcement of the theme of his book: America’s markets operate by a set of rules that are half written and half custom. That makes the individual’s responsibility to discern the hidden motivations and conflicts of interest as important as any law or regulation. … The vast and growing number of individual investors, however, lacked focus, direction, or leadership to make much of an impression on Washington policy makers. … There is no one, in fact, who represents individual investors full-time. They are the most overlooked and underrepresented interest group in America.

Individual investors who use Take on the Street as a textbook will discover that knowledge helps level the playing field. The book is a how-to for personal investing. The topics covered include how to choose a broker, pick a mutual fund, read a financial statement, and maximize 401(k) retirement savings.

The book’s subtitle, “What You Can Do to Fight Back,” is apt. However, there is one fight investors may someday take on that Levitt has not addressed but his subject could foreshadow. A populist political movement has occurred in America before, and, given the corporate scandals and market manipulations detailed in this book, could unite populists and progressives once again to rein in big business. Some political and labor leaders, judging by their comments, apparently hope it will. There is no sign that individual investors are ready to fight back politically; they are still in the bleachers. But if strong reform leadership develops, they could storm the field and say, “Not with my 401(k) you don’t.” Were this to occur, the American corporation would change: U.S. market capitalism could revert to something similar to continental Europe or Japan, and the language of class conflict could enter the public discourse.

Corporate America would be well- advised to take the corrective actions Levitt prescribes to heal our brand of capitalism, which, by its nature, produces many winners and some losers, but has always been regarded as fair to all the players.

Visit the new cpajournal.com.