In the deep throes of the Great Depression, in an effort to restore faith in America’s economy, the Roosevelt Administration promoted the development of voluntary codes of conduct to govern employment and manufacturing practices across hundreds of industries. Compliance with these codes permitted a company to display a Blue Eagle, which was supposed to signify support for New Deal efforts, and that the company was trustworthy. In this way, the Blue Eagle served as a heuristic - a cognitive shortcut - that helped consumers identify those companies engaged in fair practices so that those consumers could show their support for the recovery effort by patronizing compliant companies. Could this Depression-era technique - the use of the Blue Eagle or some similar, useful symbol - serve important ends today? Could it help restore consumer trust in institutions and actors in the financial system so that they might earn consumer trust, and prove trustworthy? At present, the United States faces a crisis of trust not unlike that which plagued recovery efforts during the Depression. This crisis is one of a lack of trust in our financial institutions. Efforts to restore trust to the financial system are foremost on the agenda of the Obama Administration and Congress. While restoring trust to the financial system will be no small feat, the financial crisis was, in many respects, a product of too much trust: in lenders, brokers and the Bernie Madoffs of the world. And this faith operated within a regulatory philosophy that believed that the market, left to its own devices, could operate at optimal efficiency. In the end, this web of trust fostered predation, overconfidence and unregulated risk; it brought about financial ruin for many and has caused incalculable hardship across the globe. For all the talk of restoring trust in the financial system, the proper focus of such efforts must be the restoration not just of trust, but of trustworthiness. To accomplish one without the other would simply invite the same set of pathologies that helped to bring about the current crisis. An approach directed at restoring trustworthiness to the financial system will require an appreciation for what makes such a system - and the actors within that system - trustworthy. Informed by the principles of Behavioral Economics, psychology and game theory, research shows that there are certain conditions likely to foster either trustworthy or untrustworthy behavior: with weak rules against cheating, and little oversight, it is more likely that people will cheat; that when in long-term relationships in which cooperative behavior can be developed, nurtured and rewarded, individuals are more likely to cooperate in the pursuit of mutually beneficial ends; that in situations with greater social distance between people, they are more likely to act in a less trustworthy fashion towards others; that where communication encourages cooperation, people tend to act in a more cooperative and trustworthy fashion. After assessing the role these principles can play in informing efforts at re-regulation in several key areas within the financial sector, in concluding this piece I propose that regulatory agencies develop a set of voluntary codes of conduct for financial sector firms. To the extent such firms follow these codes, they will be able to market this information to consumers in an easily communicated manner: in the same way the Roosevelt Administration utilized the symbol of the Blue Eagle to reflect compliance with codes of conduct across a range of industries. These codes will reflect an appreciation for the fact that most lay people will be unable to assess for themselves the extent to which financial institutions are trustworthy or not. Instead, through the development of voluntary codes of conduct, built around the principles that are more likely to lead to trustworthy behavior, consumers will be well positioned to place their faith in those firms following these codes, which will, in the end, generate strong market share for such firms
