Jack Bogle is in demand. Senators want his opinion. The best legal minds in the industry, including ICI Chairman Paul Haaga, are sparring with him (see mutual fund summit story, page one).

Just last week, Bogle testified before the Senate on fund fees, and the Senators made it obvious on how they respect the man not only for building the mutual fund empire Vanguard, but for doing it in such a righteous and upstanding manner, based on the shareholders.

Money Management Executive paired Bogle with industry pundit and www.fundalarm.com Publisher Roy Weitz last month for an interview that turned out to be an effective "I told you so" to the industry.

Here's Part II of the interview (see MME 1/5/04):

Weitz: Do you think fund fees are a legitimate target for Spitzer and other regulators to attack?

Bogle: Leave aside the word attack, and then ask me, how do I feel about Attorney General Spitzer reducing fees to settle the case?

I'd say onward and upward, I'd say, "Right on!" If the money's on the table as part of the settlement for a case, it would be stupid, for lack of a better word, to leave it in the manager's hands.

There's a point at which cash counts more than some intellectual argument.

Weitz: At this stage of the ongoing mutual fund investigation, what would you predict will be an immediate outcome?

Bogle: I'd say information for fund boards. The fund directors are going to get one of two kinds of medicine. They are either going to be told, "You can't serve on more than 10 fund boards." Or, "You can serve on as many fund boards as you want, but only if you have independent sources of analysis and information."

Weitz: Last time we spoke, you referenced a joke about there not being any "barroom brawls" at fund boards, due to the fact that they really don't have any overseers.

Bogle: Well, we've certainly seen some barroom brawls recently in this industry, but they've been between Eliot Spitzer and the industry, not between the fund directors.

Weitz: Do you think boards will actually step up to the plate now and fire some investment managers?

Bogle: The issue here is far more the ability of funds to fire managers, than the actual doing of it.

Weitz: Do you think the Code of Ethics that the SEC proposed last week goes far enough (see MME 1/26/04)?

Bogle: There needs to be a Federal standard of fiduciary duty that adds nine key words to the Investment Company Act: "It is the duty of directors to assure that mutual funds are organized, operated and managed in the interest of shareholders, rather than in the interest of investment advisors and distributors."

It's not there now. It's implied. But in the hard-hitting world we live in, in this marketing-oriented industry, it's got to be more than implied. It's got to be explicit and expressed - and I would not be adverse to putting some Federal penalties into it.

Weitz: What about your own personal wealth. You've been called a Bolshevik. You could be called a wealthy Bolshevik.

Bogle: Somebody once calculated my wealth as less than one-tenth of one percent of Ned Johnson's, so I don't know what you mean by wealthy. I may be wealthy by the standards of America, not by the standards of the mutual fund industry.

Weitz: Did you ever think you'd live to see a fund scandal of this magnitude?

Bogle: To be quite honest with you, no.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

http://www.thomsonmedia.com http://www.mmexecutive.com

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