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There’s something very different about the investment banking business. Conflicts of interest that would be out of bounds for lawyers, accountants, used-car dealers and even journalists are everyday occurrences for the Morgan Stanleys and Goldman Sachses of the world. For example, here’s a little news item from 2005:

The New York Stock Exchange, partly owned by Goldman Sachs and headed by a former Goldman president, announced in late April that it was merging with electronic-trading network Archipelago, in which Goldman is a major shareholder. The advisor to both sides in the merger? Goldman Sachs, of course.

That same article (I wrote it), included this observation from Philip Augar, a British investment banker turned writer:

How remarkable that you can simultaneously act for all those people. But that’s the system. It’s allowed.

The conflicted nature of investment banking is of course much bigger news now than it was in 2005, with the Obama administration proposing to deal with at least some of the conflicts by forcing banks to divest their proprietary trading operations. So I asked Augar the other day to contribute a blog post to hbr.org explaining how he thought the conflicts should be addressed.

He offered a very interesting proposal: split the ...