Disturbing revelations from Bloomberg's Graef Crystal on the new pay democracy among the Wall Street Five.

His piece on pay being set in smoke-filled rooms goes pretty close to suggesting out and out collusion between Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers and bear stearns.

Crystal cites evidence revealing that these firms are now paying their CEOs more and more in tandem. It's not just the size of the pay packets that's troubling but it's that over time, they're being paid more like each other.

That might be a coincidence although Crystal suggests they are doing what they used to do in the Wild West and circling the wagons:

"If you're going to pay more than any other industry and by a substantial margin, it helps if you can justify your compensation by holding up the numbers of your industry peers."

The companies would say Crystal has missed the point: it's just market forces at work. But I reckon the obscene winner-take-all pay packages reflect market failure, something I have blogged on here. And when companies collude, it's bad because it distorts the market.

That's also quite a contrast to Google's chief Eric E. Schmidt who was paid just $1 in 2006, according to the New York Times.

True, he's not exactly doing it hard with his stake in Google now worth over $5 billion. But that's not the point.

Google's pay structure sends a very different signal from the one coming out of other corporations, like the Wall Street Five. All part of a strategy designed to make web search giant stand out in the business world. And to reaffirm Google's message that it's an unconventional and creative company. That's the market working at its best.