Homeowner's Blog

Holding Financial Advisors To a Higher Standard

A section in an early version of the Senate's financial services reform bill would have imposed a fiduciary duty on all financial advisers. It has been replaced by language that would require a study to determine if the current standards are adequate. We believe that anyone providing individualized investment advice should bear a fiduciary duty toward their clients. As a result of the recent practices that brought on the current recession, many consumers no longer trust or respect companies in that sector. Restoring that trust is essential to a stable economy. 

A fiduciary duty requirement is not that onerous. Real estate brokers owe a fiduciary duty toward their toward their clients, as do attorneys and many other professionals. It's not that complicated or hard to do, nor have fiduciary duty obligations resulted in excessive numbers of lawsuits or other serious problems in other sectors.


Continue reading Holding Financial Advisors To a Higher Standard.

Should the Internet be Regulated?

Up until a recent court decision it was assumed that the Federal Communications Commission had the necessary authority to make sure consumers had the right to access legal websites and use legal applications. The FCC has needed to use that power only rarely, and consumers have enjoyed the benefits of this "network neutrality". The recent court decision was that in fact Congress had never granted the FCC such authority. FCC Chairman Genachowski has proposed an alternative approach, and has also promised that, if it is approved, the FCC will continue to use the same light regulatory hand that it has always used. Opponents of his proposal fear that it goes too far, creating the potential of regulations that could have detrimental side effects.

We believe that there must be a mutually acceptable middle ground somewhere in this debate. The telecoms all say they continue to support network neutrality, but are concerned that some future FCC may not adhere to its light regulatory approach. The companies claim that the Internet were to be heavily regulated, it could undermine continued private investment that is critical to achieve universal broadband availability. This is a credible argument - infrastructure  investment in this sector continues to be impressive despite middling profit levels, and continued federal budget realities are such that universal broadband availability will not be achieved anytime soon without that investment. With these factors in mind it would seem that there must be some formula that would give the FCC just enough authority to protect maintain network neutrality should some company violate Network Neutrality principles in the future, but not so much authority that investors or consumers need fear that private sector investment might be threatened by a heavy-handed regulatory approach by a future FCC.

BP Oil Spill

The U.S. Gulf Coast will probably suffer long term environmental consequences as a result of the explosion and sinking of the Deepwater Horizon oil rig last week.  Not only were 11 lives lost, but the effect on the environmentally sensitive coastal areas and on the coastal fishing economy may likely be far worse and longer lasting than the consequence of the Exxon Valdez tanker oil spill in Alaska. One of the saddest things about the disaster is that it might have been prevented if the rig had been equipped with an acoustic switch. This remote controlled underwater valve serves as a backup to primary shut-off systems, and is intended to enable oil rig crews to  shut down the well even if the oil rig is damaged.

Acoustic switches are mandated on offshore oil rigs by Norway and Brazil, and some major oil companies install them even where they are not required. The Mineral Management Service (MMS) of the U.S. Department of the Interior, which regulates U.S. offshore oil rig safety procedures, concluded that the $500,000 devices are not necessary in light of other existing emergency shut-off alternatives. The oil industry has raised doubts about the effectiveness of acoustic switches, which fortunately have not yet been put to a real life test. The MMS was clearly wrong about the need for additional backups, but the oil industry could be right about the effectiveness of the as yet untested  acoustic switches. The solution is to ban all new U.S. offshore oil exploration and oil production rigs until independant rigorous testing confirms that acoustic switches are fail safe, and to require their installation (or the installation of a fail safe alternative), on all new exploratory and working offshore oil rigs in the future. MMS should also re-inspect all existing U.S. offshore oil rigs and require the installation of additional safety measures as appropriate.