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So remind me, why will clients continue to do business with Goldman Sachs?

I know, it is a stupid question; investors and corporations will continue to do business with Goldman even after the bank has been charged with an alleged fraud for the same reasons they always have: because they hope, like every gambler, to beat stacked odds and because they flatter themselves that they are not the sucker at the table. There is also the small matter that for most of the clients of Goldman — or more particularly the people at those institutions making decisions — the money really isn’t theirs but the rewards definitely will be.

Goldman has been charged by the Securities and Exchange Commission with alleged civil fraud for, among other things, failing to disclose a juicy detail to investors in a security it helped to create — that a hedge fund company that was betting against the security played an important role in selecting the underlying instruments on which its performance was based. A bit like selling tickets for a ride to the moon on a rocket designed by an engineer who had bought insurance that would pay off when the rocket exploded, as it did, more or less on the launch pad.

Goldman appears to understand its clients and their motivations and thus has decided to fight the case, maintaining that the way in which it operated in this instance is just fine. The strategy, I would guess, is to hope to beat the rap on the basis that this is how business is done and wait until outrage is, as it always is, overtaken by greed. Either that or the people who are making the decision to fight are the same ones who would have to step down if they admitted they did not or could not manage the risks of a large complex institution.

“I do not believe that institutions will stop trading with Goldman Sachs over this issue. The company’s presence, systems, capital and expertise in trading markets make it number one in the world in this activity. It cannot be easily replaced.

“Similarly, I do not believe that the company will lose its corporate customers,” Dick Bove, bank analyst at Rochdale Securities, said.

Regardless of whether the actions of Goldman meet a legal hurdle of fraud, they very easily clear a very low hurdle of immoral and unethical behavior. Seriously, would you let these guys repair your car or treat your house for termites? And yet, still they come. This all reminds me of one of the many impossible things that Alan Greenspan used to believe every day before breakfast; that markets would self regulate because companies would value their own reputations and that other market participants would, if they did not, shun them for failing to behave well. That only works in small communities or in areas where buyers and sellers of services don’t earn life-changing money in short periods.

So, Goldman’s behavior, and that of its feckless clients too, demonstrates that more regulation and enforcement is needed. That perhaps, is where the Goldman as bad guys narrative threatens to mislead. The incident in question is classic late-stage behavior, it is the kind of bad actions that happen in the waning days of a bubble when all of the easy trades and deals have already been done. Trust me, the industry will soon be making the case that this was a one-off done by a bad apple, that it is covered by existing regulation, or even that disclosure laws for the creation of certain highly complex securities should be tightened up. All of which may well be true and none of which will matter much until we are nine-tenths of the way through the next bubble.

The real prize, and there is not much evidence the Goldman affair leaves us much closer to it, is wide-ranging regulatory reform that limits size, limits leverage, separates investment banking from utility banking and, not least, removes conclusively the presumption of public insurance of private risk taking. What is currently on the table is so far from that, that Goldman’s woes will probably prove only to be a sideshow, or, if you like, a circus.

James Saft is a Reuters columnist.