Boing Boing » finance

American private universities use poor kids' tuition to subsidize rich kids' degrees

Cory Doctorow — Tue, 14 May 2013 00:00:04 +0000

In The Atlantic, Jordan Weissmann does a very good job of summing up the New America Foundation's important new report, Undermining Pell: How Colleges Compete for Wealthy Students and Leave the Low-Income Behind [PDF], by Stephen Burd. The report documents how private universities in America have raised the cost of tuition to incredible heights, and reserve their "merit scholarships" (paid for with government grants) for wealthy students whose parents can pay the rest in cash, while poor students have to take out punishing loans, effectively subsidizing the rich students' education and career opportunities.

Sometimes, colleges (and states) really are just competing to outbid each other on star students. But there are also economic incentives at play, particularly for small, endowment-poor institutions. "After all," Burd writes, "it's more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student." The study notes that, according to the Department of Education's most recent study, 19 percent of undergrads at four-year colleges received merit aid despite scoring under 700 on the SAT. Their only merit, in some cases, might well have been mom and dad's bank account.
There's nothing inherently wrong with handing out tuition breaks to the middle class, or even the rich. The problem is that it seems to be happening at the expense of the poor. At 89 percent of the 479 private colleges Burd examined, students from families earning less than $30,000 a year were charged an average "net price" of more than $10,000 annually -- "net price" being the full annual cost of attendance minus all institutional and government aid. Less technically, it's what students can actually expect to pay. At 60 percent of private colleges, that net price was more than $15,000.
In other words, low-income families are routinely being asked to fork over more than half of their annual income for the privilege of sending their child off to campus for a year.

How Colleges Are Selling Out the Poor to Court the Rich

How JPMorgan Chase Affords Those Big Bonuses

Cory Doctorow — Mon, 13 May 2013 21:15:20 +0000

Alan sez, "Apparently they do it by clogging the court system with dubious - and allegedly fradulent - claims against people for credit card debt. Let's see... massive numbers of lawsuits, hasty filings, breakneck pace, questionable and incomplete records. I wonder if JPMC is taking a page from the Cartel's playbook?"

Breathtaking ATM hack nets $45M in hours

Cory Doctorow — Fri, 10 May 2013 16:00:18 +0000

The US District Attorney for the Eastern District of New York has indicted eight residents of Yonkers for allegedly participating in a global ATM heist that involved removing the withdrawal limits on prepaid debit cards, cloning them, and then getting confederates all over the world to hit ATMs at the same time and clean them out. The DA says that the scam netted $45M worldwide; $400K in NYC alone. One of the indicted defendants was murdered in the Dominican Republic last month.

The first heist, which occurred on December 22 and targeted debit cards issued by the UAE bank, dispatched carders in about 20 countries that rapidly withdrew funds in more than 4,500 ATM transactions. In New York City alone, prosecutors said, the defendants and their co-conspirators withdrew almost $400,000 in some 750 fraudulent transactions from more than 140 different ATM locations. It took just two hours and 25 minutes for the New York cell to complete, prosecutors said. A second operation commenced on February 19 withdrew about $40 million in 36,000 transactions worldwide. In just 10 hours, the New York group allegedly withdrew about $2.4 million in almost 3,000 ATM transactions.
The operation exploited weaknesses in the way banks and payment processors handle prepaid debit cards, which usually are loaded with a finite amount of funds. These cards are often used by employers in place of paychecks and by charitable organizations to distribute disaster assistance. Once the accounts were hacked and the limits removed from accounts, cards were cloned and sent to cell groups throughout the world to make fraudulent withdrawals. Additional details of the operation are available in a press release outlining the charges.

A similar heist in 2011 got $13M in one night.

How hackers allegedly stole “unlimited” amounts of cash from banks in just hours [Ars Technica/Dan Goodin]

Baconcoin tees -- limited time only!

Cory Doctorow — Thu, 09 May 2013 22:53:07 +0000

Bitcoins? Pah. Warren Ellis and Diesel Sweeties have teamed up to offer a limited edition Baconcoin tee -- available until May 14 -- that finally proposes a currency based on fat, nitrites, and salt, as nature intended.

Baconcoin Shirt from Warren Ellis

Hedge fund managers suck at making money (for you)

Cory Doctorow — Wed, 08 May 2013 15:35:54 +0000

The Financial Times analyzed the stock picks of the presenters at this week's Ira Sohn Investment conference in NYC and found that, on average, following a hedge fund manager was a much worse bet than buying passive index funds (though a couple hedgies did do pretty well last year, they were dragged down by the spectacularly wrong advice from the majority):

But a Financial Times analysis of last year's tips shows decidedly mixed results. An investor who followed every top idea from the 12 speakers last year would have made 19 per cent, less than the 22 per cent gain available from a passive index fund tracking the US stock market.
Many of the ideas have proved woefully miscued, including some from the most high-profile managers who will return to the stage on Wednesday: David Einhorn of Greenlight Capital and Bill Ackman of Pershing Square.

Tips From Wall Street Hedge Fund Gurus Fail to Reward Faithful

Ben Laurie on BitCoin

Cory Doctorow — Sun, 05 May 2013 21:40:19 +0000

I wrote yesterday about Dan Kaminsky's excellent thoughts on BitCoin, and wished aloud for comparable work from Ben Laurie. It turns out such work exists: here's Ben's critique of BitCoin, and here's his proposal for an alternative. Both are short, clear, excellent reads.

Dan Kaminsky on BitCoin

Cory Doctorow — Sat, 04 May 2013 18:54:25 +0000

Ever since BitCoin appeared, I've been waiting for two security experts to venture detailed opinions on it: Dan Kaminsky and Ben Laurie. Dan has now weighed in, with a long, thoughtful piece on the merits and demerits of BitCoin as a currency and as a phenomenon.

Bitcoin’s fundamental principle of fraud management is one of denial. If we drop our wallet on the street, the U.S. government is not going to compensate us for our lost cash. Bitcoin attempts to make the same deal, to the point where it calls its stores of keys, “wallets.” If we drop our wallet on the street — heck, if someone picks it out of our pockets — the money’s gone.
There have been bitcoin thefts. A few years ago, I tried to break Bitcoin, and failed quite gloriously. The system and framework itself is preternaturally sound. But it too is built on the foundation of buggy technologies we call the internet, and so Bitcoin must experience failures from the code around it. Hackers don’t care whose code they broke on their way to bitcoin, any more than pickpockets care that they’re exploiting the manufacturer of one’s jeans or leather wallet. So they break the server below the money, or the web interface above it. They still win.
At least, that’s the theory. Reality is more complicated. Of all the millions of dollars of purloined bitcoin that’s floating around out there, not one Satoshi of it has been spent. That’s because while most other stolen property becomes relatively indistinguishable from its legitimate brethren, everybody knows the identity of this particular stolen wealth, and can track it until the end of time.

Bitcoin Is Not as Secure, Unregulated, or Lucrative as You Might Think

Too-big-to-fail banks implicated in $500 trillion fraud: biggest price-rigging scandal in history

Cory Doctorow — Fri, 26 Apr 2013 16:11:31 +0000

In Rolling Stone, the amazing Matt Taibbi documents a breaking price-rigging scandal involving the world's biggest banks. The $500 trillion conspiracy to game the interest-rate swaps victimizes every city, town, state and nation that uses bonds to raise money, diverting an unimaginable sum from tax coffers to the pockets of mega-rich bankers. If you've been staring around at the empty storefronts, closed libraries and schools, homeless and breadlines since 2008 and wondering "Where did all the money go?" then wonder no longer.

Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn't that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap.
In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to "swap" that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.
Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix's U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.
And here's what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company's office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers' Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.
"It's obviously reminiscent of the Libor manipulation issue," Darrell Duffie, a finance professor at Stanford University, told reporters. "People may have been naive that simply reporting these rates was enough to avoid manipulation."
And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they're paying the real price for swaps or a price being manipulated by bank insiders for profit. Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it's also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.
So although it's not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.

Everything Is Rigged: The Biggest Price-Fixing Scandal Ever (Thanks, Elix!)

Widespread, illegal debtors' prisons in Ohio

Cory Doctorow — Sun, 07 Apr 2013 01:20:04 +0000

A new ACLU report called The Outskirts of Hope (PDF) documents the rise of illegal debtors prisons in Ohio. A majority of municipal and mayors' courts (an unregulated and rare system of courts only permitted in two states) surveyed by the ACLU routinely imprison people for their inability to pay fines, a practice banned in both the US and state constitution. 20 percent of the bookings in the Huron County Jail are "related to failure to pay fines."

Taking care of a fine is straightforward for some Ohioans — having been convicted of a criminal or traffic offense and sentenced to pay a fine, an affluent defendant may simply pay it and go on with his or her life. For Ohio’s poor and working poor, by contrast, an unaffordable fine is just the beginning of a protracted process that may involve contempt charges, mounting fees, arrest warrants, and even jail time. The stark reality is that, in 2013, Ohioans are being repeatedly jailed simply for being too poor to pay fines.
The U.S. Constitution, the Ohio Constitution, and Ohio Revised Code all prohibit debtors’ prisons. The law requires that, before jailing anyone for unpaid fines, courts must determine whether an individual is too poor to pay. Jailing a person who is unable to pay violates the law, and yet municipal courts and mayors’ courts across the state continue this draconian practice. Moreover, debtors’ prisons actually waste taxpayer dollars by arresting and incarcerating people who will simply never be able to pay their fines, which are in any event usually smaller than the amount it costs to arrest and jail them.

The report documents heartbreaking cases, like Samantha Reed and John Bundren, a couple with a nine-month-old who were both ordered to pay fines they can't afford. John diverts whatever seasonal/part time wages he earns to Samantha's fines so she can look after their baby, while he goes to jail for ten-day stretches for failure to make payments. They are effectively indigent, but are not given access to counsel when they appear in court over their debts.

(via Reddit)

How DC insiders launder insider market information for the rich

Cory Doctorow — Sat, 06 Apr 2013 02:32:18 +0000

We already know that Congresscritters make huge bank through insider trading, exploiting a loophole that lets them place bets on the stock market based on rules they have yet to announce. But this game-rigging con isn't limited to elected officials: a whole class of unregulated beltway insiders make their living by wheedling "political intelligence" (that is, insider information about upcoming regulations and laws) out of politicians and their staff, and then selling it on to consultants who package it up into legal insider trading recommendations for the hyper-rich.

The U.S. Government Accountability Office has released Financial Market Value of Government Information Hinges on Materiality and Timing, a 34-page report on this practice, trying to figure out how pervasive the scam is. They didn't get any great answers:

"The political intelligence industry is flourishing, enriching itself and clients in the stock market, yet the report notes that it could not document who these people are or how much they profit," [Craig Holman, government affairs lobbyist for government watchdog Public Citizen] said. "Without full transparency of the activity of these political intelligence consultants and their clients, it is nearly impossible to know if they are trading on illegal insider information."

Government Report Examines 'Political Intelligence,' But Questions Remain [Legal Times/Andrew Ramonas]

(Thanks, Alan!)

Bank pays for costumed flashmob to recreate Rembrandt's Nightwatch in a mall

Cory Doctorow — Fri, 05 Apr 2013 21:46:55 +0000

I'm not normally a fan of corporate commercials designed to be "viral media," but one's very clever. The Dutch financial giant (and money launderer for Iran) ING paid to have a group of actors play out a dramatic reenactment of the events depicted in Rembrandt's classic painting The Night Watch, climaxing with a posed, framed tableau that re-created the painting itself. It's awfully fun to watch Rembrandtian cosplayers charge around a Dutch shopping mall while the shoppers stand agog.

Flashmob brengt 'De nachtwacht' tot leven (via Making Light)

This American Life's report on kids and disability claims riddled with factual errors

Cory Doctorow — Fri, 05 Apr 2013 16:10:57 +0000

A couple weeks ago, I listened to Unfit for Work: The startling rise of disability in America an interesting program on the supposed rise in disability claims produced by Planet Money and aired on This American Life (where I heard it). The program raised some interesting points about the inaccessibility of certain kinds of less-physical jobs to large numbers of people, but it also aired a lot of supposed facts about the way that parents and teachers conspired to create and perpetuate disability classifications for kids.

Many of the claims in both half of the report are debatable, and many, many more and simply not true. A Media Matters report called This American Life Features Error-Riddled Story On Disability And Children systematically debunks many of the claims in the story, which NPR has modified slightly since posting online (though NPR and Ira Glass continue to stand behind the story).

FACT: Medical Evidence From Qualified Professionals Is Required To Determine Eligibility
Government Accountability Office: "Examiners Rely On A Combination Of Key Medical And Nonmedical Information Sources." A Government Accountability Office report found that disability determination services (DDS) examiners determined a child's medical eligibility for benefits based on a combination of school records and medical records, and that if medical records in particular were not available, they were able to order consultative exams to review medical evidence:
DDS examiners rely on a combination of key medical and nonmedical information sources -- such as medical records, effects of prescribed medications, school records, and teacher and parent assessments -- in determining a child's medical eligibility for benefits. Several DDS officials we interviewed said that when making a determination, they consider the totality of information related to the child's impairments, rather than one piece of information in isolation. Based on our case file review, we estimate that examiners generally cited four to five information sources as support for their decisions in fiscal year 2010 for the three most prevalent mental impairments.
[...]
If such evidence is not available or is inconclusive, DDS examiners may purchase a consultative exam to provide additional medical evidence and help them establish the severity of a child's impairment. [Government Accountability Office, 6/26/12]

The Media Matters report cites high-quality sources like the GAO throughout, and makes an excellent case for a general retraction of this report by NPR. I hope that they, and Glass, will reconsider their endorsement of this report.

This American Life Features Error-Riddled Story On Disability And Children (via Naked Capitalism)

Queen goes on austerity footing, receive mere £5M pay-rise from the taxpayers

Cory Doctorow — Wed, 03 Apr 2013 01:27:23 +0000

At only £36.1M from the public purse (up £5M from last year), the poor Queen is positively underpaid. After all, she was divinely chosen to be monarch. God will be angry.

Game theory and bad behavior on Wall Street

Xeni Jardin — Thu, 28 Feb 2013 20:13:36 +0000

An opinion piece by Chris Arnade on the asymmetry in pay (money for profits, flat for losses), which he describes "the engine behind many of Wall Street’s mistakes" That asymmetry "rewards short-term gains without regard to long-term consequences," Chris writes in a new guest blog at Scientific American. "The results? The over-reliance on excessive leverage, banks that are loaded with opaque financial products, and trading models that are flawed." [Scientific American Blog Network]

Is the "secret" room at Houston's ZaZa a voyeuristic sex-dungeon for rich weirdos?

Cory Doctorow — Wed, 20 Feb 2013 20:56:37 +0000

A redditor called joelikesmusic reported that a friend of his had been checked into a weird, narrow dungeon-like theme room at the Hotel Zaza in Houston (it's got lots of theme suites -- I once stayed in their awesome space-themed one with my family, on the way to my honeymoon). When he complained, the front desk apparently told him that it was a mistake -- no one was supposed to use that room.

The ZaZa's management told the press that it was a "prison" themed room, and that there was no mystery, but intrepid redditors have been examining the pictures (especially the portrait of Jay Comeaux, a banking exec from the disgraced Stanford Banking Executive, and have been spinning out theories about secret societies and rituals in the comments.

However, one commenter called lejefferson makes a plausible case that the room is a sex-dungeon with a one-way voyeur's mirror, used by rich weirdos:

What person that you know keeps a creepy picture of a guy over their television. This is obviously a secret room either personal or for a small group of people for sexual liasons/ S&M prostitution or worse. The mirror and small space of the room also indicates there is a good chance that the mirror is two way and that people could pay to come watch the sexual/S&M events occuring. The photo of a Stanford Banking Executive, (Jay Comeaux), on the wall further indicates that this is a high society sex room. The fact that the clerk said, "This room isn't supposed to be rented out" indicates that there was a big mistake and they didn't want anyone to find out about the room. The bricks on the wall line up exactly with the placement of the mirror suggesting that they do not continue behind it but that this is a two way mirror.

ZaZa insiders question - what's up with room 322? (self.houston) (via Super Punch)

Economic recovery in the US actually made 99% of Americans poorer, top 1% captured 121% of gains

Cory Doctorow — Thu, 14 Feb 2013 02:11:03 +0000

"Striking it Richer," a paper by Emmanuel Saez (an economist at UC Berkeley) looks at the way that the dividends of the slow US "economic recovery" have been distributed. Saez finds that 121% of the economic gains since 2009 have been captured by the richest 1% of Americans -- in other words, despite economic growth, the poorest 99% of Americans actually got poorer through the "recovery."

This confirms a pattern that Matt Stoller highlighted: that income inequality increased more under Obama than under Bush. And the new Saez paper also describes how it came about. In short form, income to the top 1% is significantly influenced by capital gains. Remember, the tax reporting is not clean here: rising equity and bond markets help all those private equity and hedge fund professionals, who are able to get capital gains treatment for what ought to be labor income. But the paper also stresses that the lower orders were hit hard in the aftermath of the global financial crisis than in the dot-bomb era, which also saw a big drop in capital gains. That isn’t as hard to understand. The collapse of the dot-com mania didn’t impair the real economy overmuch because it was not fueled in a meaningful way by borrowings. By contrast, the housing bubble, and more important (in terms of damage to the financial system) the much housing exposure created synthetically by CDOs that consisted entirely or mainly of credit default swaps was highly geared, hence when it collapsed, it took credit providers down with it.

Yes, Virginia, the Rich Continue to Get Richer: the Top 1% Got 121% of Income Gains Since 2009 [Yves Smith/Naked Capitalism]

Ontario Teachers' Pension Plan invests in Internet surveillance company that backstops notorious dictatorships

Cory Doctorow — Wed, 06 Feb 2013 15:00:55 +0000

The Ontario Teachers Pension Plan (OTPP) has joined a private equity consortium that acquired the notorious Internet surveillance company BlueCoat, yoking teachers' retirement security to the fortunes of a company that has systematically assisted some of the world's most brutal dictatorships to censor and surveil their citizenry. Blue Coat has blood on its hands, people rounded up and tortured and even killed thanks to it and products like it, and it's a disgrace for teachers -- whose professional ethics embrace freedom, intellectual inquiry, and fairness -- to be part of the financial exit strategy for the people who founded and ran that company.

Ron Deibert and Sarah McKune from the University of Toronto's CitizenLab and Munk School of Global Affairs have written an op-ed in the Toronto Star, detailing some of BlueCoat's ethical unsuitablity, and the fact that the OTPP went into the transaction having been thoroughly briefed on what they were getting into.

If you'd like to read more about BlueCoat, check out CitizenLab's excellent report: "Mapping Global Censorship and Surveillance Tools."

Now, a year later, Citizen Lab has released a new report, Planet Blue Coat: Mapping Global Censorship and Surveillance Tools. Using a combination of technical interrogation methods, our researchers scanned the Internet to look for signature evidence of Blue Coat products. While our investigation was not exhaustive and provided only a limited window of visibility into the deployment of such tools, what we were able to find raises serious concerns.
We uncovered 61 Blue Coat ProxySG and 316 Blue Coat PacketShaper devices, which are designed to filter online content and inspect and control network traffic. While legitimate for some purposes, these capabilities can also be used for mass censorship and surveillance of a country’s Internet users. It is noteworthy in this respect that 61 of these Blue Coat appliances are on public or government networks in countries with a history of concerns over human rights, surveillance and censorship (see the work of the OpenNet Initiative documenting such concerns).
Specifically, we found the ProxySG product, designed to filter access to information online, in Egypt, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. We found the PacketShaper appliance, capable of deep packet inspection and mass surveillance, in Afghanistan, Bahrain, China, India, Indonesia, Iraq, Kenya, Kuwait, Lebanon, Malaysia, Nigeria, Qatar, Russia, Saudi Arabia, South Korea, Singapore, Thailand, Turkey and Venezuela.

Teachers’ pension plan invests in Internet surveillance firm. (Thanks, Mom!)

The Parable of the Ox: podcast explains the disastrous separation of financial markets from the real economy

Cory Doctorow — Thu, 24 Jan 2013 01:03:32 +0000

An excellent recent episode of the BBC Radio 4 math/current affairs show "More or Less" dramatized "The Parable of the Ox," a short article by John Kay originally published in the Financial Times (~~paywalled, alas, or I'd link to it~~ available from Kay's site). Fans of James Surowiecki's Wisdom of the Crowds will know the first part of this story -- wherein the average of several guesses about the weight of an ox was more accurate than the guesses of any of the experts in the crowd. What this podcast and the article adds is a coda about how the use of "guesses" (or stock trades) as a way of weighing the ox quickly departed from guesses about the weight of the ox (or the value of a firm) and turned into guesses about other peoples' guesses about other peoples' guesses -- a financialized system that soon has no connection to the real economy or the real ox. And it ends, predictably enough, when the ox dies.

The Parable of the Ox [More or Less]

MP3

The parable of the ox [John Kay]

Bitcoin casinos report large profits

Cory Doctorow — Wed, 23 Jan 2013 17:42:57 +0000

Bitcoin-based casinos are reporting pretty serious, six-figure profits on a series of games wherein players' apopheniac tendencies cause them to hallucinate non-randomness in the performance of a pseudorandom-number generator. The casinos claim that their financial numbers can be trusted because of BitCoin's shared logfile, which can be parsed to show their earnings.

SatoshiDice, which has servers based in Ireland, is a pseudo-random number generator game where players choose a number and then bet on the likelihood that a “rolled number” is greater than the one they’ve selected. If the rolled number is greater, then they win. The house has a 1.9 percent edge—which is where the profit comes in.
The online dice game has returned profits to the tune of ฿33,310 ($596,231) during 2012—an average actual profit of ฿135.96 ($2,416) per day from May through December 2012. During that period, players put down a total of 2,349,882 bets. That’s still minuscule by Las Vegas standards, but respectable.
bitZino, by contrast, released its figures in early January and seems to be doing a decent pace of business too (bitZino's bookkeeping only measures June 9 to December 31, 2012). The online casino—hosted in the US, offering online poker, blackjack, craps, and roulette—did not publish a profit and loss statement. bitZino did say it had paid out ฿28,986 ($495,000)—and that 3.2 million wagers were made during H2 2012.

Bitcoin-based casino rakes in more than $500,000 profit in six months

Point of Sale skimmer that prints out real-seeming receipts

Cory Doctorow — Tue, 18 Dec 2012 14:00:02 +0000

Brian Krebs reports on a terrifyingly real-seeming Point of Sale skimmer: a device that looks and feels just the thing you normally stick your credit-card into and then enter your pin into, which can print out a real-seeming receipt showing the transaction was approved by your bank. Instead, what this thing does is record your card number, PIN, and other information needed to replicate your card and use it to clean out your account.

This miscreant sells two classes of pre-hacked wireless Verifone POS devices: The Verifone vx670, which he sells for $2,900 plus shipping, and a Verifone vx510, which can be had for $2,500. Below is a video he posted to youtube.com showing a hacked version of the vx510 printing out a fake transaction approval receipt.
From the seller’s pitch: “POS is ‘fake’ and stores D+P [card data and PIN], prints out approved receipt or can be setup for connection error. Software to decrypt the data is provided. It keeps d+p inside memory for manual retrieval via USB cable.”

Point-of-Sale Skimmers: No Charge…Yet

If you're suspected of drug involvement, America takes your house; HSBC admits to laundering cartel billions, loses five weeks' income and execs have to partially defer bonuses

Cory Doctorow — Mon, 17 Dec 2012 23:31:55 +0000

Rolling Stone's Matt Taibbi is brilliantly incandescent in his column about the HSBC drug-money-laundering settlement with the US government. HSBC was an active, knowing participant in laundering billions in drug money, and was fined a small percentage of its net worth (five weeks' income). Meanwhile, private individuals who are suspected of being incidentally involved in the drug trade routinely have all of their property confiscated, down to their houses and cars, under America's insane forfeiture laws. Then they often go to jail.

It doesn't take a genius to see that the reasoning here is beyond flawed. When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC's Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn't protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most "reputable" banks may in fact be captured institutions whose senior executives are in the employ of (this can't be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department's response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way...
... So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That's the punishment? The government's negotiators couldn't hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them "partially" wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department's opening offer – asking executives to restrict their Caribbean vacation time to nine weeks a year?
...How about all of it? How about every last dollar the bank has made since it started its illegal activity? How about you dive into every bank account of every single executive involved in this mess and take every last bonus dollar they've ever earned? Then take their houses, their cars, the paintings they bought at Sotheby's auctions, the clothes in their closets, the loose change in the jars on their kitchen counters, every last freaking thing. Take it all and don't think twice. And then throw them in jail.

Outrageous HSBC Settlement Proves the Drug War is a Joke (via Dan Hon)

(Image: [HSBC], a Creative Commons Attribution (2.0) image from willsurvive's photostream)

Citigroup leads finance world in bullshit-generating capacity

Cory Doctorow — Fri, 07 Dec 2012 03:43:08 +0000

The Atlantic's Derek Thompson has located a truly world-beating piece of obfuscated corporate bullshit, courtesy of Citi, who took 86 words to convey a simple fact: "Citigroup today announced [lay offs]. These actions will [save money]."

Citigroup today announced a series of repositioning actions that will further reduce expenses and improve efficiency across the company while maintaining Citi's unique capabilities to serve clients, especially in the emerging markets. These actions will result in increased business efficiency, streamlined operations and an optimized consumer footprint across geographies.

Citigroup Eliminates 11,000 Jobs in History's Most Corporate-Jargony Paragraph Ever (via Making Light)

(Image: Muddy Maher's, Kinsale, a Creative Commons Attribution Share-Alike (2.0) image from ujh's photostream)

Translating plutocrat economic campaign-speak into plain English

Cory Doctorow — Wed, 05 Dec 2012 16:04:16 +0000

The Campaign to Fix the Debt is a coalition of hyper-rich CEOs and bankers that's been formed to campaign for social safety net cuts, seizing the "fiscal cliff" moment as a chance to change the public debate and protect tax breaks to the richest 1% while slashing services upon which the rest of the country relies. Alternet's Lynn Parramore provides a handy crib-sheet for translating the Campaign's manifesto to plain English:

1. “Fix” means cut: When they say “fix” Social Security, they mean cut Social Security. Fixers want to convince the public that a well-managed, hugely popular program that does not add to the deficit (it’s self-funded) is somehow in crisis and requires intervention in the form of various cutting schemes. They seek this because many of the rich do not want to pay taxes for Social Security, and financiers want very much to move toward privitization of retirement accounts so they can collect fees on such accounts.
2. “Reform” means rob. When the say “reform” the tax code, they mean “make taxes even lower for the rich.” The wealthy do not pay their fair share of taxes in the United States, which is a major reason there is a large deficit in the first place. When the very wealthy pay lower tax rates than ordinary working people, the result is an increasing redistribution of income upward that puts the U.S. in the top 30 percent in income inequality out of 140 nations, according to the Central Intelligence Agency. We’re a shameful #42. Income inequality is not only unfair, it’s dangerous and makes society unstable.
3.“Bipartisan” means all of the rich. Fix the Debt is a pro-business ideological movement pretending to be a bipartisan group of concerned citizens. But the group is really just a coalition for the greedy, unpatriotic rich. There are plenty of financiers and other 1 percenters in the Democratic Party, and some of them have decided to join forces with their GOP counterparts to work toward a goal that means a great deal to all of them: Making the rich even richer.

The Obscenely Rich Men Bent on Shredding the Safety Net

Ad for freelance Russian bank-robbers

Cory Doctorow — Thu, 29 Nov 2012 21:42:38 +0000

Brian Krebs has published an ad from "Foreign Agents," a notorious Russian crime service. They're advertising the availability of foot soldiers in the USA who can help cash out hacked bank accounts and credit cards. Unlike traditional bank-fraud mules, who don't know that they're part of a scam, these "associates" are "неразводные" ("nerazvodni" or "not deceived").

The proprietors of this service say it will take 40-45 percent of the value of the theft, depending on the amount stolen. In a follow Q&A with potential buyers, the vendors behind this service say it regularly moves $30,000 – $100,000 per day for clients. Specifically, it specializes in cashing out high-dollar bank accounts belonging to hacked businesses, hence the mention high up in the ad of fraudulent wire transfers and automated clearinghouse or ACH payments (ACH is typically how companies execute direct deposit of payroll for their employees).
According to the advertisement, customers of this service get their very own login to a remote panel, where they can interact with the cashout service and monitor the progress of their thievery operations. The service also can be hired to drain bank accounts using counterfeit debit cards obtained through ATM skimmers or hacked point-of-sale devices. The complicit mules will even help cash out refunds from phony state and federal income tax filings — a lucrative form of fraud that, according to the Internal Revenue Service, cost taxpayers $5.2 billion last year.

Say what you will about their criminal tendencies, those bank robbers have excellent art direction.

Online Service Offers Bank Robbers for Hire

Wall Street is not made up of "numbers guys"

Cory Doctorow — Tue, 13 Nov 2012 02:33:48 +0000

Chad Orzel's post, "Financiers Still Aren’t Rocket Scientists" is a timely reminder that Mitt Romney and other Wall Street Types are not, by and large, superhero math geniuses with their fingers on the arcane numeric truths underpinning all reality. Some quants are genuinely impressive mathematicians, but the industry's reputation for "numbers guys," is just wrong-o.

You would think that the 2008 economic meltdown, in which the financial industry broke the entire world when they were blindsided by the fact that housing prices can go down as well as up, might have cut into the idea of Wall Street bankers as geniuses, but evidently not. The weird idea that the titans of investment banking are the smartest people on the planet continues to persist, even among people who ought to know better– another thing that bugged me about Chris Hayes’s Twilight of the Elites was the way he uncritically accepted the line that Wall Street was the very peak of the meritocracy. It’s not hard to see where it originates– Wall Street types can’t go twenty minutes without telling everybody how smart they are– but it’s hard to see why so many people accept such blatant propaganda without question.
Look, Romney was an investment banker and corporate raider at Bain Capital. This is admittedly vastly more quantitative work than, say, being a journalist, but it doesn’t make him a “numbers guy.” The work that they do relies almost as much on luck and personal connections as it does on math– they’re closer to being professional gamblers than mathematical scientists. This is especially true of Bain and Romney, as was documented earlier this year– Bain made some bad bets before Romney got there, and was deep in the hole, and he got them out in large part by exploiting government connections and a sort of hostage-taking brinksmanship, creating a situation in which their well-deserved bankruptcy would’ve created a nightmare for the people they owed money, which bought them enough time for some other bets to pay off.
Romney has no shortage of nerve, and while he creeps me out, he has the sort of faux charm that works well in the finance community. But he’s not a “numbers guy” in any sense that looks meaningful from over here in the land of science. He can do the math needed to add up his personal fortune, but the game that he made his money playing isn’t a rigorously mathematical one– people get rich in finance as much by playing hunches and cutting sharp deals as by crunching numbers. There are people who make their way in that business by taking a rigorously data-driven approach to investing– one of the many things I need to write up for the blog at some point is a review of a forthcoming book called The Physics of Wall Street– but they’re nowhere near a majority of the industry, and Romney’s not one of them.

Financiers Still Aren’t Rocket Scientists (via Making Light)

When your identity thief is your mom

Rob Beschizza — Mon, 12 Nov 2012 18:48:18 +0000

Lianne Parker at Billfold: 'Growing up, it was common to see my mother go on shopping sprees, and then hide the bags in her closet before my dad got home. The closest we ever came to discussing the event that began my descent into mountains of credit card debt was her quietly saying over the phone, “I’m sorry I ruined your credit score.”'

Cheating F1 team wins the right to deduct its fines from its taxes

Cory Doctorow — Thu, 11 Oct 2012 23:36:10 +0000

McLaren, a cheating Formula 1 team, got caught and fined £34M, so they deducted it from their taxes. The British tax authority objected, but they appealed, and won. Ren Reynolds has a gamerly perspective on this on Terra Nova:

In short McLaren argue that the fine was an expense related to the trade that they were engaged in. That there are exceptions to this such as statutory fines, but this was not such a fine, it arose out of the contract between them and the sporting body and it was not a 'punishment' but a commercial deterrent as such it was a risk of and thus an expense of trade.
The way that this has been presented in some elements of the UK media is a some what popularist version of the dissenting opinion in the case by Dee. This opinion holds that the fine was a punishment and that 'fines and penalties' of a similar nature are not allowable under tax law. What's more "the conduct of McLaren fell way outside any normal and acceptable way of conducting their trade, as found by the WMSC."
The problem with this view is that it misunderstands the nature of games / sport and in particular their relationship with law.
To put it simply the sort of conduct that is accepted as part of a gaming or sporting practice is not just that set out by the rules but also a wide set of acts that are within the tradition of the actual practice of that game or sport. That is, there are types of cheating that while outside the rules of the sport are still seen as being within the bounds of that sport.

Can I get a tax deduction for cheating?

High-flying financiers subscribe to high-ticket astrologers

Cory Doctorow — Tue, 09 Oct 2012 21:19:42 +0000

According to Heidi N. Moore's report in Marketwatch, thousands of high-flying Wall Street traders secretly rely on advice from "financial astrologers" who tell them what the stars and planets predict for the market. One trader requests his newsletter in a plain brown wrapper so that his colleagues won't know his secret.

Financial astrologers like Karen Starich say traders know they're up against a lot of rich, smart people.
"They want to have that edge," she says. "They want to know what the future is."
Starich chargest $237 annually for her newsletter, which 300 traders subscribe to for news of what will happen to the stock prices of companies, or even bigger, to the Federal Reserve. She sees dark times ahead in the Fed's horoscope.
"They now have Saturn squared to Neptune, which is really bankruptcy," Starich explains.

Astrology guides some financial traders (via Lowering the Bar)

(Image: Astrological Clock, Torre dell'Orologio, Venice, a Creative Commons Attribution (2.0) image from spencer77's photostream)

Quant: leaving finance made me happy, you should try it

Cory Doctorow — Mon, 01 Oct 2012 16:17:31 +0000

Cathy "Mathbabe" O'Neil is a former finance-industry quantitative analyst who escaped her former career and has advice for other quants looking to do something better with their lives. She works in a startup now, and offers a fascinating study of the contrasts between finance culture and startup culture:

First, I want to say it’s frustrating how risk-averse the culture in finance is. I know, it’s strange to hear that, but compared to working in a start-up, I found the culture and people in finance to be way more risk-averse in the sense of personal risk, not in the sense of “putting other people’s money at risk”.
People in start-ups are optimistic about the future, ready for the big pay-out that may never come, whereas the people in finance are ready for the world to melt down and are trying to collect enough food before it happens. I don’t know which is more accurate but it’s definitely more fun to be around optimists. Young people get old quickly in finance.
Second the money is just crazy. People seriously get caught up in a world where they can’t see themselves accepting less than $400K per year. I don’t think they could wean themselves off the finance teat unless the milk dried up.

Telling people to leave finance (via O'Reilly Radar)

(Image: Antarctica: McMurdo Station Finance - 50c, a Creative Commons Attribution Share-Alike (2.0) image from elisfanclub's photostream)

UK banks use robo-callers to make fraud-check calls, conditioning customers to hand out personal information to anonymous machines that phone them up out of the blue

Cory Doctorow — Fri, 28 Sep 2012 04:00:09 +0000

My latest Guardian column, "Automated calls, fraud and the banks: a mismatch made in hell," reacts to the news that UK banks are using robo-call machines to check in with customers on possibly fraudulent transactions, and going about it in the worst way possible:

The banks, bless them, are only trying to prevent fraud, but this is a pretty silly way of going about it. For starters, there's the business of calling up people and asking them to give you all the information necessary to prove that they are indeed a bank customer – all the information that a fraudster needs to impersonate that person at the bank, in other words. The banks have spent decades systematically conditioning us to give our personal information to fraudsters, which is a strange way to prevent fraud.
But at least this silliness had one saving grace: a fraudster can only make so many calls per day, and so the scope of losses from such a programme of bad security education is limited by the human frailties of con-artists.
Enter the robo-caller. The banks are now outsourcing their fraud prevention to computers that can make dozens of calls all at once, around the clock, fishing (or phishing) for someone who just happened to have made an unusual purchase and is thus willing to spill all his details down the phone to get it approved. Note that most of the categories of purchase that trigger false positives from fraud detection systems are also the sort of thing that customers are anxious to see go off without a hitch. The unusual and the urgent often travel together.

Automated calls, fraud and the banks: a mismatch made in hell