Two Words

At some point during last week's financial meltdown, when I began to feel as though we are living through times more apocalyptic than 9/11, two words started to pester my consciousness.

At first they were a suggestion.

Then they became a whisper.

Then they morphed into a concept as I read Sunday's NY Times articles about AIG's special units.

Now they're a full-fledged roar.

The two words?

Fiduciary Responsibility.

"Fiduciary responsibility" is a very, very serious legal and professional rule of law that is part of the bedrock of insurance/financial operations and professional behavior.

And that's not even considering the aspect moral responsibility which, in insurance and financial circles is called "moral hazard". Because, after all, we are talking about insurance/financial markets.

Fiduciary responsibility is so serious - or maybe I should say "was" - that violation is considered grounds for criminal prosecution.

I have not seen nor have I heard these two words in all the print and broadcast media I've consumed in the run-up and day-to-day coverage of the causes of our global condition.

These two words, it seems to me, are the most fundamental root of what we are now living through.

What does "Fiduciary Responsibility" mean? In summary it commits professionals to:

• Utmost Care - The agent is bound to the higher standard of a professional in the field which extends the standard of duty to investigate within the means of the profession, to ensure the maximum protection and information be provided the principal.

• Integrity - Defined as the soundness of moral principle and character. It means the agent must act with fidelity and honesty

• "Honesty and Duty of Full Disclosure" of all material facts, either known, within the knowledge of or reasonably discoverable by the agent which could influence in any way the principal's decisions, actions or willingness to enter into a transaction

• Loyalty - An obligation to refrain from acquiring any interest adverse to that of a principal without full and complete disclosure of all material facts and obtaining the principal's informed consent. This precludes the agent from personally benefiting from secret profits, competing with the principal, or obtaining an advantage from the agency for personal benefit of any kind.
  

• Duty of Good Faith - Includes total truthfulness, absolute integrity and total fidelity to the principal's interest. The duty of good faith prohibits any advantage over the principal obtained by the slightest misrepresentation, concealment, threat or adverse pressure of any kind.

None - and I mean NONE - of these characteristics existed in the basis of selling subprime mortgages.

None of these characteristics existed at AIG and other insurers and banking interests when professionals bet they would never have to pay off mortgage insurance claims or document their assets at actual value.

Logically (and I realize that greed, not logic, is the operator here) this means that there are a great many people who, because they violated their professional/legal fiduciary responsibility, should be criminally prosecuted.

Anyone else sharpening the little pointy ends of his/her pitchforks?