PW: What motivated you to write Take on the Street?
AL: As a former stockbroker and head of a Wall Street firm, and someone who headed a stock exchange and the SEC, I felt the individual investor was the most underrepresented force in our economy, but one of the most powerful potential forces. They were powerless, because they didn't organize.
PW: Do you see your book as a rallying point for investors?
AL: I see my book as pointing out aspects of the market of which they may be unaware and the knowledge of which would make them more skeptical and circumspect investors.
PW: Why hasn't this information been made available before?
AL: Number one, the investors generally treat brokers or money managers as Olympian figures that have specialized knowledge that they couldn't possibly question. Two, mutual funds tend to disguise the things they do by the way they word them, by deceptive advertising, by not telling about changes in managers. Three, the stock markets themselves are biased toward their members rather than investors. And I think Congress has been overwhelmingly in favor of special interests, such as the banks, the lawyers and the accountants.
PW: Are there groups investors can ally themselves with?
AL: There are some, but not enough. The labor unions, the Consumers Federation of America, the Motley Fool—these could be rallying points for their interests.
PW: Have recent changes gone far enough?
AL: The ultimate protection an investor has is knowledge. Anyone who goes into the markets blind might as well go into the casino. Brokers' interests are not aligned with investors' interests. With the firm I was first associated with, our first goal was making commissions, and that colored the type of investments we made for our clients.
PW: Has this been the result of willful ignorance or permissiveness on the part of individual investors?
AL: I think there have been excesses built into our economy because of the runaway bull market. The conflicts of interest become even greater. Accountants have been captives of their clients, rather than protectors of their investors. Investment banks, markets and mutual funds have built-in conflicts of interest. There's a pattern of conflict here that will hurt investors unless they know the rules of the game. I think we have a better informed public than we've ever had in history. It's whether or not they're willing to use the tools they have. They haven't been. When they buy into an Enron or a World Com when they don't understand what those companies do, they're partially to blame for their own undoing.
PW: Is there a rift between classes of investors? Between the truly rich and the middle classes?
AL: I think there is. We tried to address this at the SEC with fair disclosure, but we had strenuous resistance from the corporations and from Congress. There are good sides to the business, but like any business, self-interest is the strongest motivator. The public hasn't been sufficiently skeptical. Most people simply don't know the dark side of the business. I feel like a preacher on this issue. Investors can never insulate themselves from the important decisions.
PW: Why haven't other writers been brave enough to tackle this subject as bluntly as you have?
AL: I don't think people have had the same life or experiences I've had. The fact that my father was the head of the largest pension fund in the country [New York State] and that my mother was a beneficiary of that pension, it had an effect on me. So when I was head of the SEC and had a chance to do something for people, I took that responsibility seriously. The origins of my feeling on the subject are no secret. I got that from my father.