One in every three Americans owns shares in a mutual fund. Sold as a low-cost way for the investor-in-the-street to own a stake in a portfolio of securities, the funds have grown at a phenomenal rate over the past decade (see chart 1 on the following page). But a still-unfolding series of scandals suggests that beneath the industry's calm and trusted surface may lurk practices quite as unsavoury as any of those revealed last year at Wall Street's big investment banks, or the year before at the likes of Enron. Because Americans trust mutual funds so much, some fear that this could do more damage to American capitalism than any of the earlier scandals. Wall Street worries that it is yet another reason for the general public to be cynical about financial markets. John Thain, the chief operating officer of Goldman Sachs, a big investment bank, warns that what has appeared so far may be only the tip of an iceberg.
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