Market Discipline vs. Mob Discipline
22nd November 2009
Goldman Sachs has a new risk to manage: mob rage. News that the Wall Street firm has already set aside $16.7 billion for bonuses and other employee pay this year has provoked a visceral reaction.
Goldman itself has done nothing wrong, though. All it has done is to master a business that operates within a dysfunctional regulatory system. Washington does not allow for the marketplace credibly or consistently to discipline Wall Street firms, including Goldman. Goldman acts rationally within this irrational regime.