Goldman: Will a Spanking Do It?

Over the weekend, I chatted with a new acquaintance and former Goldman Sachs employee – back-office person, she insisted ($300K back-office person, of course). She had been mulling over the SEC’s charges of fraud against Goldman and wondering what kind of punishment might be fitting for what Paul Krugman has referred to as “looting” behavior. At one point, her 12-year-old son piped up about it, too. So, she discussed with him, what would do the trick, to reprimand as well as correct bad behavior.

“Well, when I spank you,” she said to him, “it’s to teach a lesson. But when I spank you in public, there’s a humiliation factor, too.”

Would a public spanking shame Goldman executives into never being tempted by insider trickery again? Or would a private spanking be sufficient?

I vote for private spanking. But what does that even mean? On Wall Street, where pretty much nothing other than money matters, public admonishment won’t really have any impact. Reputations on Wall Street are built on how clever one can be to grow lots and lots of money. In so many other areas of business, reputation is built on image and the ability to lead, manage, etc. Public opinion matters.

That’s just not the case on Wall Street. The only way to create pain on Wall Street is with restrictions on money. Set executive pay limits, but make sure there aren’t ways around it. Curb bonuses, and know where the loopholes are, and seal them up.

A spanking will do it, sort of. It doesn’t have to be public, and perhaps shouldn’t be; but it does have to get at what’s valued most.