Great Mutual Fund Scandal

The Great Mutual Fund Scandal of 2003 is both a surprise and an inevitability. An inevitability because a debacle like the aftermath of the telecom/media/tech boom almost demands a big scandal in the financial markets -- thereby opening a window for some ambitious, heretofore relatively obscure public servant to burnish his resume scourging the malefactors.

It is a surprise as aggregate damage to investors' circumstances, and the individual consequences of abuses, were far worse from the excesses of the late, great boom. Whereas the subdivisions of America are full of tech-loaded "201(k)s" and depleted online brokerage accounts, the net damage to the worst affected mutual-fund shareholder was a few percent per year. Even the highest numbers from academics indicate an effective transfer from mullets to millionaires in single-digit billions per year, compared with scores of billions of compensation to a mutual admiration society of traders, investment bankers, high-rolling brokers, ve...