The New York Stock Exchange had planned to open trading electronically while shuttering its physical trading floor. "We are open for business and at the same time acting in accordance with actions taken by the city and state of New York," said NYSE CEO Duncan L. Niederauer said in a release yesterday afternoon.

But NYSE reversed course  last night, announcing it would halt operations completely. The exchange is closed today, and may close tomorrow, "pending confirmation," according to a release.

Nasdaq is also closed today; "it is likely that the markets will be closed" tomorrow, the exchange said in a release.

Bond markets will open, but the Securities Industry and Financial Markets Association recommended that markets close at noon today.

Wall Street firms, meanwhile, have been asking nonessential staff to work from home. Goldman Sachs, Citigroup, JPMorgan and American Express are among firms to close buildings in evacuation zone A in downtown Manhattan. From a Citigroup memo published by The Times:

All staff based in Citi facilities within mandatory evacuation zones must invoke their work-from-home strategies for Monday and Tuesday unless they are in business-critical roles that have established alternative work locations. Other Citi facilities outside of mandatory evacuation zones should be accessible for critical personnel only; non-critical personnel should invoke their work-from-home strategies.

Paul Volcker. Photo by Alex Wong/Getty Images.

“The trouble is that brokers are screaming, ‘Trust me, trust me, you don’t have to bother your little head. I’ll take care of you, I’ll manage your securities and give you financial planning for you and your children and everybody else,’ Tamar Frankel, a law professor at Boston University told us. “‘Trust me, give me discretion to decide what to do with [your] money.’ If that’s not fiduciary, then what is?”

Ms. Frankel was on the phone to discuss the most important consumer issue you’ve probably never heard of. For more than half a century, the financial professionals who offer investing advice have fallen into two broad categories. Broker-dealers charge commissions on the securities they trade on behalf of clients. Investment advisers charge fees, typically as a percentage of assets under management. There’s another crucial difference. Investment advisers must register with the Securities and Exchange Commission and have a fiduciary duty to act in their clients’ best interests. Brokers, meanwhile, are self-regulated and operate by the standard of “suitability.”

“The brokers say they have a rule, and the rule is, they must give you suitable investment advice,” Ms. Frankel said. “I use my expertise to give you something that you can use, that’s suitable for you. But suitability doesn’t mean cheapest. It may be suitable, but you can go next door and get it at half price.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 called for the SEC to study the possibility of governing the two groups under one regulatory regime. But two years after Congress passed the law, the process has stalled. Worse, as far as Ms.Frankel is concerned, the Securities Industry and Financial Markets Association, or SIFMA, as the securities industry lobbying group is known, has put forward a vision of the rule that she said would turn the definition of the fiduciary standard on its head.

She isn’t alone. Wednesday, former chairman of the Federal Reserve Paul Volcker, Nobel-prize winning behavioral economist Daniel Kahneman and Vanguard Group founder John Bogle joined Ms. Frankel and eight other academics, investors and former regulators signed a declaration in support of a uniform standard that would require broker-dealers and investment advisers to act in their clients’ best interests. Their beef? “The fact is that brokers who are not registered with the Securities and Exchange Commission (SEC) are not required by law to put their clients first,” the statement read in part.

Or as co-signer Burton Malkiel, author of A Random Walk Down Wall Street, told The Observer: “If you’re a securities broker, you’re going to want to sell the things where you make the most money, where your commission is greatest. For me, that’s the opposite of how it should be. Investment advice should have the fiduciary duty that the customer comes first.”

The signatories to the declaration are joining the battle at a moment when the action has ground to a halt. An SEC study released in early 2011 recommended the creation of a uniform standard, and agency chairman Mary D. Schapiro has called the standard a priority. A late-2011 ETA for a proposed rule came and went, however, and in January, the SEC said it would be conducting a survey in support of a cost-benefit analysis for the rule. In support of the declaration, some of the signatories are visiting the SEC next month to argue for a fiduciary standard that would require investment advisers and broker-dealers to serve clients’ best interests and avoid conflicts.

Still, the SEC’s cost-benefit survey has yet to come out, and we couldn’t find anyone who would hazard a guess at when a rule will ultimately be proposed. “The longer it languishes, the more difficult it gets to move things along,” Dan Barry, head of government relations for the Financial Planning Association, told us, adding that he doesn’t expect to see a proposal this year.

Not only is the rule-making in a holding pattern, but there are some involved in the debate who think the sides aren’t so far apart. “SIFMA agrees something should be done, we think something should be done,” Mr. Barry told us. “There’s an unusual degree of support across a broad population of stakeholders,” agreed Barbara Roper, director of investor protection at the Consumer Federation of America.

Which isn’t to say that broker-dealers and investment advisers are joining hands and singing Kumbaya on the issue. “The investment adviser community, to my way of thinking, wants to take that statute that was designed to their business model and export it to the broker-dealer community,” Ira Hammerman, SIFMA’s general counsel, told us. “SIFMA is trying to take a more pro-investor, a more realistic approach,” he said, adding: “Customer choice is really at the center of what we’re saying.”

For their part, some investment advisers think SIFMA is trying to redefine the concept of the fiduciary standard to fit its current business model. “They say that all products now available through brokers should be available through the fiduciary standard,” said Knut Rostad, founder and president of the Institute for the Fiduciary Standard, which drafted the declaration signed by Ms. Frankel, Mr. Malkiel and others. “They are changing what the fiduciary standard means, and the additional point is that they’re changing the meaning to what the suitability standard currently is now.”

The parallel regulatory frameworks governing investment advisers and broker-dealers grew out of the stock-market crash of 1929. Broker-dealers were regulated under the Securities Exchange Act of 1934, while the Investment Advisers Act of 1940 and a series of court decisions set the standard of behavior of investment advisers registered with the SEC.

The dual structure was less of an issue in the early days, when the securities available to investors were fewer and far simpler. When a stockbroker called a customer to tout a company, the customer had a reasonable understanding of what the broker stood to gain—a commission on the securities bought and sold—and a sense that the broker would promote good investments—or risk losing future business.

As the financial products became more complex, incentives were harder to discern. Mutual funds, for instance, offered varying fee structures, allowing investors to decide how they wished to pay for the product: With an up-front sales charge that took an initial bite out of the principal, or with ongoing fees. An investment adviser registered with the SEC was required to recommend the product in a client’s best interest. A broker-dealer, on the other hand, could offer a client either one.

“If the branch manager tells you one product gets you 3 percent commission and that one gets you 7 percent, it’s the nature of human beings and capitalism and life that you’re going to sell that one,” Josh Brown, author of the blog The Reformed Broker and the book Backstage Wall Street, told The Observer. “There’s nothing illegal about it. As long as the product is suitable for the client, it can be done.”

Mutual funds, Mr. Brown said, are a tame example: “Principal protection funds, high-fee annuities. Private REITs, fucked IPOs, secondary offerings. There’s a litany of shit that you won’t find a fiduciary adviser selling.”

Which isn’t to say, supporters of the fiduciary standard would add, that brokers are bad actors by definition, but that the current regulatory regime creates situations in which the broker’s best interest may come in conflict with his client’s. SIFMA’s Mr. Hammerman didn’t dispute the point. “The broker-dealer model has many conflicts of interest,” he said. “If you’re a broker and you wanted a municipal bond portfolio, the best pricing might be trading with me because I have the best inventory for those bonds ... And you say, ‘Fine, I’ll take it.’ I’m selling from my inventory a bond, and you’re buying it. We’re on different sides. There’s nothing wrong with that if you’re trading with me and I’ve given you disclosure. Or you might be more comfortable buying from a third party. The pricing might not be as favorable, but we can do that.”

That sounds a little like trusting Wall Street to deal fairly with less sophisticated investors—a notion with a history of, uh, mixed results—but Mr. Rostad said his group wasn’t trying to squelch all conflicts. “Commissions are a conflict, but they can be managed. In and of itself, proprietary products are not a conflict with the uniform standard.” The sticking point? “The issue with any conflict is, can you mitigate or manage the conflict so that you proceed in the client’s best interest?” he said.

Traditionally, broker-dealers have relied on written disclosures to mitigate potential pitfalls conflicts of interest. But disclosure is often insufficient protection: For one thing, how many investors read, let alone understand, the fine print at the back of a mutual fund prospectus? For another, academic research on the subject has shown that disclosure can create a false sense of safety with regard to conflict of interest.

Daniel Kahneman’s classic study on anchoring may indicate that once an investor has chosen to trust an adviser, a disclosure of conflict of interest is unlikely to shake the decision. The version of the uniform standard that Mr. Rostad is promoting calls for the disclosure of material facts. But a fiduciary rule that requires advisers to act in clients’ best interests would rely less on disclosure.“The bottom line of the research that we see is that even short, clear concise disclosure fails ... in the sense that investors don’t believe it,” he said.

That’s one bottom line, anyway. Another is that a uniform standard is unlikely to be written anytime soon. Regardless of who wins the presidential election, meanwhile, it’s frequently speculated that Ms. Schapiro will leave the agency, making it anyone’s guess how rule-making will proceed under new leadership.

Perhaps because the battle is stalled, the crusaders for the fiduciary standard tend to take a philosophical tack. Mr. Malkiel told The Observer that he signed the declaration because he believes in the possibility of a “better world.” Andrew Golden, chief investment officer for Princeton University’s endowment, signed because the battle over the fiduciary standard is “about society, about protecting my mother and her personal account, about protecting my friends and my kids.”

“As the brokers themselves realize that they’ve signed onto something that calls for a standard of behavior, that they’re operating in companies that have signed on or been forced to sign on to that standard, it changes the appetite for the creation of certain securities and certain investments,” Mr. Golden said.

Mr. Rostad put it more grandly. “The capital markets depend upon trust, and the economy depends on the capital markets,” he explained. “We have a lot at stake in terms of making the free market economy work in a moment of historic, unprecedented levels of distrust and disgust.”

pclark@observer.com

Over at Wall Street Oasis, a site that aims to inform financial pros and students as they approach career decisions, 28 percent of 600 users polled listed their number one reason for wanting to work in finance as "$,$$$,$$$." Meanwhile, a New York mag survey of 74 current and recently departed finance workers belonging to an online community for “corporate professionals who want to ‘do something different’” found that 47 percent quit because "my life is spiritually hollow."

(The number two answers? At Escape the City, "I work nonstop, my quality of life is terrible" was the second most popular reason for leaving. At WSO, the young professionals are also choosing finance for "exit opps/career growth," though in fairness, "Passion—I truly love doing this" was a close third. )

And so the world turns, and the burnt-out make way for the eager-eyed. There are 800,100 workers employed in the U.S. securities industry at the end of March, according to SIFMA, the industry trade group, down from about 870,000 at the end of August 2008, the month before Lehman failed, but up slightly over the last two years.

When the next round of budding financiers get tired of the hours, say uncle and start a new round of websites for students who want to be bankers, or bankers who want to start websites, there'll be a new round of college grads waiting to take their place.

After all: $,$$$,$$$.

Amid evidence of sham documents and widespread paperwork gaffes, if not systemic fraud that increasingly looks like it may be terrifically deep, Bank of America recently halted all foreclosure proceedings around the country. That followed similar announcements from the home-loan giants JPMorgan Chase and GMAC.

But Wall Street does not sympathize. "You had people putting zero down to get massive houses they couldn't afford to be in," he said Monday morning, "but now they want to stay. And the government wants to let them stay, because they're voters." A few hours later, the Goldman Sachs arm Litton Loan Servicing said it had suspended certain foreclosure proceedings, too. "Talk about a financial scandal," a Wall Street Journal editorial this weekend joked. "A consumer borrows money to buy a house, doesn't make the mortgage payments and then loses the house in foreclosure--only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine?"

"The problem is they don't deserve to be in that place. They probably deserve to be there less than they used to," the source continued, referring to incomes lower now than they'd been when the loans were made in the first place. "You do need to foreclose, and you need to go back to people living in houses that are consistent with their income levels."

In order to understand Wall Street's shrug during this foreclosure crisis, which as many as 40 attorneys general are expected to announce an investigation into this week, the key is to appreciate just how deeply connected the gesture is to Wall Street's view of who's to blame for the financial crisis.

The feeling, the idea at the bottom of all the others, is that even if Wall Street aggravated the crisis by bundling and betting on mortgage-backed securities that turned out not to live up to high ratings, it was not a matter of, as Citi chairman Richard D. Parsons told The Observer this summer, "bad people trying to do bad things." The loans wouldn't have been there in the first place if American home buyers, driven by what The Weekly Standard calls immediate gratification without personal responsibility, hadn't overstepped their bounds.

So when Ken Bentsen, the executive vice president for public policy and advocacy at Wall Street's largest trade group, the Securities Industry and Financial Markets Association, talks about this foreclosure fraud crisis, he points out that the homeowners arguing about administrative problems are the ones who've gotten themselves tied up in the foreclosure route in the first place, regrettably. "No one has raised the question that anyone who's going through this process shouldn't have been in the foreclosure process," said Mr. Bentsen, who, as a congressman from Texas, helped write the Sarbanes-Oxley and Gramm-Leach-Bliley acts.

"Look, I think it's just human nature. People want to have a bogeyman," Ralph Cioffi, the former Bear Stearns hedge fund manager, who was found not guilty of fraud, said in a recent Observer profile about anger at banks and bankers. "People don't want to take responsibility for their own actions."

"Again," said Mr. Bensten, "we're dealing with mortgages that are in default, which is, again, what we're dealing with here."

"WE'RE NOT AWARE of a single case so far of a substantive error," The Journal's editorial said. "Out of tens of thousands of potentially affected borrowers, we're still waiting for the first victim claiming that he was current on his mortgage when the bank seized the home." The fund manager Barry Ritholtz, who writes the blog The Big Picture, and Naked Capitalism's Yves Smith, whose chronicle of the foreclosure jumble has been encyclopedic, furious and convincing, would disagree. They've linked to stories in papers like the Sarasota Herald-Tribune and The South Florida Sun Sentinel about banks mistakenly taking over homes that hadn't been foreclosed on. Not only was Fort Lauderdale's Jason Grodensky not late on the payments on the house that Bank of American foreclosed on, but he didn't even have a mortgage.

"Thanks for the query," The Journal's editorial page editor said, responding to an interview request, "but I think I'll let the editorial speak for itself."

"If there was a preponderance of evidence, massive, or a large amount of misfiled, not misfiled, but incorrectly foreclosed actions on people that were not in default," Mr. Bensten, who said he hadn't seen those stories, explained, "that's something that should be looked at."

SLIDESHOW>>EIGHT HEAD-SHAKING HORROR STORIES FROM THE FORECLOSURE CRISIS

A former member of the Goldman Sachs management committee was not so sure. "Don't you think, out of 10 million data points, there will be 500 unbelievably screwy examples? It's a little bit so what," he said on Tuesday. "I don't get it. It doesn't feel like this is fraud. Maybe there is sloppiness, but at the end of the day, people took out mortgages they can't pay back. Now I worry that if anything, the government is making something that is just a clerical error into something that would be nefarious or whatever."

Officials like the House Committee on Financial Services' Alan Grayson have called for a nationwide foreclosure moratorium to investigate two levels of potential fraud. The first is what banks would call paperwork problems: In sworn depositions, a GMAC middle manager named Jeffrey Stephen testified that some months, he had to sign more than 10,000 foreclosure documents without looking at them, and without proper notarization.

But then there's the potential layer of fraud below those "robo-signed" documents, which goes back to the mortgages themselves. As Mr. Grayson wrote in a letter to the administration, not only is it unclear who owns cities of foreclosed houses, because of negligent record keeping, but many of the loans that now make up trillions of dollars of securities are in "a legal gray area."

"It seems a lot about it is, like, notaries," the Goldman source said. "I didn't know anyone even focused on what a notary did! It almost struck me as some kind of anachronism that must have had some value in the past--which I don't understand."

On Monday, Mr. Bentsen's SIFMA released a statement that warned that a moratorium would catastrophically hurt housing sales, and the economy. But wouldn't investors be nervous about investing in mortgages from here on out if the gray areas weren't looked into? The flip side of that, Mr. Bentsen said, is that you don't want to make those investors uncertain about their ability "to get at their capital if at any time the government can impose a moratorium."

Reuters' Felix Salmon pointed out that it was the association's own member banks that had voluntarily imposed the foreclosure halts. Mr. Bensten said that there was "no discrepancy," because a voluntary moratorium is much different than one imposed by the federal government.

As it happens, David Axelrod had told Meet the Press a day earlier that the White House does not support a big moratorium. "Because," he declared, "there are in fact valid foreclosures that probably should go forward."

ON TUESDAY, CITIGROUP announced it would stop providing foreclosure work to the huge Florida law firm run by David J. Stern, which the state attorney general has been investigating. In addition to a deposition from an ex-employee who described rampant fraud, Mr. Stern himself has been accused of sexual harassment, and is the target of a class-action case accusing him of racketeering. He is said to have a jet-propelled yacht called Misunderstood.

This year, Mr. Stern's foreclosure-processing business was essentially acquired by a New York investor named Kerry Propper. "I believe in efficient markets," Mr. Propper, who has spent his free time working on and funding an upcoming documentary on genocide, told The Observer this year. "An efficient market needs certain things, and the main thing, I've learned over many years, is a rule of law." Mr. Propper believes in systems. "If someone is borrowing money and they don't pay, and the bank decides it's all right," he said, "then the system will break, O.K?"

The fate of those borrowers is something Wall Street is going to be thinking about for a long time. "They were trying to ride a bubble. They were not just innocent victims," said Robert Shiller, the Yale economist who co-created the Case-Shiller housing price index, and who predicted the collapse in his book Irrational Exuberance. "But on the other hand ... they were lured into betting on a speculative bubble. And there were people who benefited from continuing that feeling--wealthy people making money."

"The question to me is not do you foreclose or do you not foreclose. The question is when and with what philosophy you foreclose," the man on the bank restructuring team said. "If you want to reduce the amount of leveraged homeowners you have, you need to ultimately kick them out of their homes." A colleague walked up: His recommendation was to burn houses. It would lower the supply.

mabelson@observer.com