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Goldman Sachs and America’s Regulation/Supervision Paradox

April 26, 2010

Stephan Richter in The Globalist:

In the ultimate analysis, a financial culture is only as good as those who monitor its practices, styles and traditions — and these individuals must be empowered and determined to ensure that certain rules are followed. In a word, it’s mostly about supervision — and not so much about regulation. A culture that fails on the supervisory front cannot save itself by enacting more rules.

How is it possible that the United States — the very country which invented the bureaucratic, deeply resourced mega-corporation and sought to run and staff its government in a similar fashion — should fail in this task?

That is indeed a question that has puzzled many smart people outside the United States for some time. The likely answer to this seeming riddle has five components:

First: Overstaffing.

In any bureaucratic entity, there comes a point when the internal complexity is such that a smoothly functioning management of decision-making processes is no longer possible. The intra- and inter-agency coordination process in the United States — with the budget-wasting addition of tens of thousands of government contractors and consultants — has taken on gigantic proportions. [More]

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