Realtors, Wall Street & Fiduciary Duty

Goldman to Clients: You Shouldn't Have Trusted Us

If you didn't know, Realtors' owe their clients a fiduciary duty.

What does that mean?

Actually, quite a bit.

The legal definition of fiduciary duty has two components: a duty of loyalty, and a duty of care.

By definition, your Realtor knows more than you do about the housing market -- that's what you're paying them for.

The duty of loyalty means that they won't misuse that advantage.

On the contrary, Realtors commit to use their market knowledge and professional skills to serve their customers' best interests. As opposed to, say, their own.

Now segue to Wall Street.

Already, it's clear how Goldman Sachs, et al are going to defend themselves against the tsunami of lawsuits sure to be brought over trillions in securitized, mortgage-backed securities that Goldman helped sell.

As the world now knows -- and Goldman knew at the time, as evidenced by its bets against said securities -- the securities were ticking time bombs, destined to cost the purchasers -- their clients -- grievous losses.

Goldman's likely defense?

Not that it didn't do it.

Not that the housing market bust was an unforeseeable, one-in-a million occurrence (what statisticians call a "black swan event"). After all, Goldman not only foresaw the bust, but made billions betting on it.

But rather, that its clients were "big boys" -- sophisticated institutional investors who knew, or should have known, what they were doing. Boo-hoo.

Except that that's not what fiduciary duty is about.

Whether Goldman's clients were multi-billion dollar hedge funds or Daffy Duck, it was legally obliged to use its (undeniable) information advantage to act in the clients' best interests.

Instead, it knowingly harmed its clients while acting in its own interest.

If that doesn't constitute breach of fiduciary duty . . . the term's meaningless.