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Every bank I have worked for has a policy on employee gambling. It is policed, but it doesn't need to be policed noisily off trading floors because the sort of person who is at risk for problem gambling doesn't make a good banker. On trading floors it is mostly self-policed because all traders are gamblers, but all traders also know that a problem gambler is a shitty trader. Banks are also all over their senior employees' (and their wives') personal finances - they aren't explicitly looking for consumer debt problems, but I suspect they would notice.
Boards of Directors (as a matter of corporate law) and the CEOs they delegate to get a lot of discretion in how to be long-term greedy - the legal term is the Business Judgement Rule. If Fuld and the Board thought that creating a culture where the execs and their wives were part of a Lehman "family" (which he did - that Fuld ran retreats for execs' wives attracted a lot of bemused coverage after the bankruptcy) was the best way to align incentives at the top of a bank, they were absolutely allowed to do that. And part of that culture is prohibiting affairs.
Your just-so story sounds entirely plausible and a Silicon Valley startup which regularly needs to break laws or act immorally would probably do well to preferentially hire rakes, with Uber being the proof of concept. A bank is a different type of organisation and needs to have a more small-c conservative corporate culture.
On the merits, execs having mistresses creates conflicts of interest (particularly if the mistress is employed by the bank or a client) and avoidable complexity. I understand why banks would want to discourage it. Managing conflicts of interest is part of the core competency of a bank (for both client trust and regulatory reasons) and the simplest way to manage them is to avoid the ones that don't come with a profit opportunity. Allegedly (I am not senior enough for this to be visible at my level) banks don't like exec spouses having careers that could create the impression of a conflict of interest, and mistresses are more trouble for multiple reasons.
Personally, I favour the mafia rule for mid-to-senior employees of high-trust organisations - you can shag your wife or a whore, but shagging respectable women you are not married to is verboten.
It is not policed I imagine you mean, except by self-policing via honesty policy in an "I am 12" kind of way.
Financial institutions also have policies—enforced by honesty policy—on some combination of things such as drug use, domestic or foreign political connections, gift giving and receiving, outside business activities, and reporting of convictions including misdemeanors (with a special focus on DUIs, financial corporations are highly booze-cruiser-phobic). Many or all of which likely correlate with corporate misconduct or company (dis)loyalty, but would be irritating to infuriating if your boss was all up in your grill threatening you about, and pulling your wife aside to tell her she can snitch on you and he'll take care of her. This goes back to the unusualness of Dick's isolated boner for marital infidelity and the way he expressed that boner.
The focus is on the investments side for insider trading and fair markets reasons. Supposedly, some institutions will run periodic soft credit checks on those with direct ability to transfer Treasury or customer funds, but I wouldn't be surprised if this were largely apocryphal or rare—or if executives were exempt (whether because they're "above-the-law" or because they themselves may not have the actual direct ability, technically-speaking, to transfer said funds).
There is still plenty of demand for rakish-type personalities in modern day banks, where aggressive morals-agnostic individuals can be quite value-add in finding opportunities and staking first mover advantages. Banks still need directors and executives willing and able to poach star employees from other banks, cultivate relationships with domestic and foreign politicians, help win the larger sell-side deals, be a driving force in new lines of businesses that better help transfer money from the company's clients to the company.
This was up to eleventy in the pre-2008 era—the era of which we're discussing. It was even more of a Wild Wild West before Dodd Frank and the mergers/conversions of the large investment banks with/into bank holding companies, an era where investment banks had much greater latitude in pursuing their ambitions. Lehman Brothers was an investment bank in 2008, not the Bank Holding Company XYZ that we're used to in 2025.
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