Clouded judgment

From an article in the Sunday New York Times:

...Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.

We talk a lot with our clients about using prediction markets as early warning indicators to simply begin asking more questions. Longstanding friendships and power centers in organizations are well entrenched and difficult to operate around. The signals from the markets, not only from the stock prices, but also from the data generated by trading, are a credible and efficient way to expose reality so ultimately the decisions made are what is right for the business, not just for the people involved.