Mistrust Funds

January 29, 2006

'The Battle for the Soul of Capitalism,' by John C. Bogle

Review by JEFF MADRICK

If anyone still harbors the fantasy that the business scandals of the past few years were the handiwork of just a few bad apples, they should read John C. Bogle's "Battle for the Soul of Capitalism."

Bogle has been a Wall Street insider for 50 years, the founder and long the chief executive of Vanguard in Philadelphia, one of the three or four largest mutual fund management groups in the nation. At Vanguard, he refused to charge the high annual fees that his competitors did. He was also among the first to offer investors index funds, at a time when most mutual fund managers were still claiming they could easily beat the market averages. (Index funds essentially duplicate the market averages, and have typically outperformed most of the pros over time.)

In this book, Bogle abhors what he sees as rampant cheating among his peers - not only mutual fund managers but brokers, bankers, lawyers and accountants. It's not just a few bad apples, he says: "I believe that the barrel itself - the very structure that holds all those apples - is bad."