Owners Stop Paying Mortgages and Stop Fretting About It Because Banks Ignore Delinquent Borrowers

Owners Stop Paying Mortgage ... And Stop Fretting About It

May 31, 2010

New York Times - For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.

There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.

In Pinellas and Pasco counties, which include St. Petersburg and the suburbs to the north, there are 34,000 open foreclosure cases, said J. Thomas McGrady, chief judge of the Pinellas-Pasco Circuit. Ten years ago, the average was about 4,000.

“The volume is killing us,” Judge McGrady said.

Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.

“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”

They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.

“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.

It was a stupid move by their lender, according to Mr. Pemberton.

“They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”

His mother, Wendy Pemberton, who has been cutting hair at the same barber shop for 30 years, has been in default since spring 2008. Mrs. Pemberton, 68, refinanced several times during the boom but says she benefited only once, when she got enough money for a new roof. The other times, she said, unscrupulous salesmen promised her lower rates but simply charged her high fees.

Even without the burden of paying $938 a month for her decaying house, Mrs. Pemberton is having a tough time. Most of her customers are senior citizens who pay only $8 for a cut, and they are spacing out their visits.

“The longer I’m in foreclosure, the better,” she said.

In Florida, the average property spends 518 days in foreclosure, second only to New York’s 561 days. Defense attorneys stress they can keep this number high.

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time.

“I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said.

“These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”

But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future.

“I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’ ”

Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up.

Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond.

“I need another year,” he said, “and I’m going to be pretty comfortable.”

Banks Ignore Delinquent Borrowers

May 13, 2010

CNBC - Some encouraging signs on the foreclosure front may not be as rosy as some are reporting.

RealtyTrac, the online foreclosure sale site, shows a 9 percent dip in the number of properties with foreclosure filings in April, month-to-month.

The driver of that dip is a big drop in new notices of default.

The final stage of foreclosure, that is bank repossessions (REO) shot up to a new record high, up 45 percent from a year ago.

When I first read the report I thought, okay, we knew there was a big pipeline of loans that would not get modified and would have to come out the end at some point; now is that point. The fact that fewer loans are going into the pipeline should be our focus, and that's a positive. That's what I thought until I interviewed RealtyTrac's Rick Sharga.

"People are sitting in their houses not paying their mortgages, and the banks are letting those delinquencies extend longer and longer periods of time before they put them in foreclosure," Sharga told me.

That, he adds, is the main reason we're seeing lower numbers of new defaults.

The borrowers are in default, but the banks aren't paying attention, so they don't show up in the numbers.

He goes on:

"The fact that we have six to six and a half million loans that are either seriously delinquent or in foreclosure also suggests we are not nearly out of the woods. If we just started to absorb that inventory at the pace we're currently seeing new foreclosure proceedings we have about a 50 to 55 month supply of loans that yet have yet to be processed, so we have a way to go before we are out of the mess."

I know you're all going to tell me that Sharga works for a company that makes its money selling foreclosures, so he's going to play the bear side.

Take it for what it's worth.

But Sharga makes a compelling point when it comes to redefaults on loan modifications.

A lot of folks are either falling out of the trial modification period or not qualifying in the first place, and those loans are moving quickly to bank repossession.

California-based mortgage analyst Mark Hanson adds perspective with a look at "cancelled foreclosures."

These are not tracked by RealtyTrac, but they "bite right out of Notices of Default and foreclosures, so to get a real idea of how 'credit' is doing, you have to add a certain percentage back."

That's because Hanson believes the redefault rate on these modifications will be at the very least 50 percent 6-19 months out.

Why a Short Sale Often Takes So Long

April 18, 2010

Herald Tribune - ... No one can fully explain why it remains such a difficult task to complete one short sale -- the process by which a lender agrees to accept less than is owed on a home -- while another sails through. The only certainty as to why lenders do what they do: their bottom line.

Sometimes short sales bring more cash than foreclosures, and vice-versa. Which one it is depends on a host of factors, not the least of which is whether a lender has an agreement with the Federal Deposit Insurance Corp. for reimbursement of most losses on a bad loan like those sold short.

Multiple liens on a house and fat home-equity lines of credit that must be dealt with first are easy explanations for why a short sale languishes. Another is that lenders -- historically only handling a few cases each year -- are now overwhelmed with hundreds or more in a month, a logjam that builds upon itself.

Then there are the complexities of the post-boom world: loans that have been bundled with hundreds of others, then securitized and sold to an investor, and scores of Florida banks on the verge of insolvency that do not want to account for losses on a short sale.

Even with those hurdles, there are short sales that can take 90 days or less from offer to consummation.

Simply put, the decision an individual lender or investor group makes -- even if that is not to make a decision -- is laden with a convoluted mix of what-ifs, if-thens, no-ways and sure things ...

In the worst straits are those borrowers, usually through sub-prime loans, who have had their mortgage wrapped into an investment pool like those held by Citigroup and Bank of America, Ross said.

About 25 percent of boom-time mortgages are contained in such securities. Few of those securities have even basic guidelines for short sales, he said.

"They got into some pretty crazy financial gymnastics," Ross said. "If your loan is in one of those groups it could be very challenging to get a short sale approved."

The process of bundling notes and selling them to investors as a security was a boom-time staple, said Irv DeGraw, a banking professor at St. Petersburg College. AIG, Citigroup, Lehman Bros. and others backed, or insured, these so-called "credit-default swaps." When the housing market began tanking in 2006 and foreclosures began piling up, pay-outs to the investors skyrocketed.

Eventually the federal government stepped in with the multibillion-dollar bailout that shook America's consciousness.

"It was an absolutely maniacal problem," DeGraw said. "Nobody understood exactly what we were dealing with and then it exploded. Those taking the risk did not understand the amount of risk they were exposed to."

In a counter-intuitive move, many investment groups preferred a complete collapse of the security rather than agreeing to short sales.

"When the mortgages start to get into trouble an insurance policy kicks in and they are made whole," DeGraw said. "If they grant a short sale they are not made whole. It's one of these bizarre nightmare scenarios where people got too sophisticated."

Thomas Budzyn, past president of the Mortgage Bankers Association of Southwest Florida, acknowledged the nightmare scenario that banks are facing with these bad loans.

"You are going to see more banks go out of business this year than in the last ten years combined," Budzyn said, noting that dozens of banks nationwide have failed so far this year.

In the midst of that crisis, it is somewhat understandable that getting a short sale done is often difficult.

"Some of the short sale offers I have seen, for example, are on a loan of $400,000, and the offer comes in at $125,000," Budzyn said. "Some of the banks would rather wait until a more reasonable offer comes in rather than take that much of a hit upfront."

Many are loath to approve a short sale because they stand on perilous footing -- one in four by the count of Ken Thomas, a Miami-based expert on Florida banking with a doctorate in economics.

"The banks in Florida are having a very difficult time because they make loans on real estate and we are ground zero for the collapse," Thomas said. "Instead of being hit by a Category 5 hurricane we've been hit with a Category 5 mortgage crisis."

Some banks are urging federal regulators not to come in and force them to admit all of their problem loans, he said.

"Most banks are trying to buy time. It is called the 'delay and pray strategy,'" Thomas said. "You delay valuating the house at market and pray the value will come back. If you mark it down for short sale and do that deal you have to take a hit to your capital."

Others employ what Thomas calls the "extend and pretend" strategy to keep regulators from noticing a delinquent mortgage, whether that be lengthening the term, lowering the interest rate or allowing a distressed homeowner to skip a few payments.

"Banks will say there is nothing wrong with that because we have one on the books for a million dollars and the market will come back in a year, so why we should we hurt our shareholders," Thomas said.

Banks are hoarding assets to avoid the fate that Thomas described, said Matt Augustyniak of Bradenton's Horizon Realty, Horizon Title and Horizon Financial.

"They have to show as much assets as possible to balance the books," Augustyniak said. "That is why these banks are dragging their feet on short sales."

When Bank A takes over failed Banks B's assets, usually laden with risky mortgages, the FDIC often agrees to a "loss-share" agreement to minimize the acquiring bank's risk. The agreements cover anywhere from 80 percent to 95 percent of any losses on the bad loan portfolio.

In some cases, that prods lenders to agree to a short sale, especially if they can make more with the FDIC cash than the banks would if the house fell into foreclosure.

But the opposite can be true as well, with the lender actually making more from a foreclosure if the loan has a private mortgage insurance payout and can be resold at a good price.

The Committee for a Responsible Federal Budget, a Washington, D.C.-based think-tank, reports that the FDIC has taken over 203 failed banks since 2008, many with a loss-share agreement. Total deposits so far this year equaled $18 billion. In 2008, it was $389 billion, and at an estimated cost to the FDIC of $64.4 billion.

Seventy-eight percent of the existing loss-share agreements have no deductible, so the FDIC starts paying banks for their losses immediately.

For single-family mortgages, the loss-share agreement stays in effect for 10 years and covers losses when the loan is modified, foreclosed upon, when a second mortgage is charged off, or when the property is sold short.

"It has helped us sell a considerable amount of assets that we normally would have had to keep," said FDIC spokesman David Barr. "We audit the loss-share agreements to look that they are modifying the loans in a timely manner and not just opting for foreclosure or short sale. They have to choose the option that makes the most economic sense to the FDIC."

Despite the efforts of the Obama administration to speed and streamline the short-sale process, experts say banks do whatever will provide the best outcome for their bottom lines.

Charryl Youman, a sales agents with Prudential Florida Realty in Venice, has seen that firsthand.
What the banks are often doing by scuttling a short sale seems -- at first -- to make no sense, Youman said.

She had a buyer put in three offers over the course of 240 days on a two-bedroom, two-bath home selling short for $82,000. The buyer gave up.

"I never did hear from the bank," Youman said. "I did, however, hear from the foreclosure listing agent to take off my lockbox because the bank now owned the property. They sold it for $48,000."

But it turns out the lender may have played the game very well, she said.

The bank received mostly interest payments for three years before the buyer defaulted. It also received the payout from the private mortgage insurer, which was about $50,000, and then the proceeds of the foreclosure sale.

"The bank walked away with $98,000 -- and the three years of mortgage payments," Youman said. "The bank is not really losing much and sometimes can actually make money on these deals -- and so they can have little incentive to take a short sale offer."

Taypayer Handouts and Ripoffs

No, We Don't Need a Teacher Bailout

May 27, 2010

Cato Institute - From the recent apocalyptic pronouncements of Education Secretary Arne Duncan and others, you may think our schools are selling their last bits of chalk and playground sand to employ mere skeleton crews of teachers and staff. The truth is "apocalypse not."

Yes, American Federation of Teachers President Randi Weingarten last week warned that, without a huge infusion of federal cash, public schools face "draconian cuts." And the American Association of School Administrators declared a few weeks ago that without a bailout, job losses "would deal a devastating blow to public education."

Then there's Duncan's warning, while making the TV-news rounds last week, of educational "catastrophe" if a federal rescue isn't forthcoming. And now the National Education Association has launched something called "Speak Up for Education & Kids" — a campaign to get people to call their congressmen and demand a handout for education.

The scaremongering is producing results. House Appropriations Chairman David Obey (D-Wisc.) is planning to put $23 billion to save education jobs in a supplemental spending package. The move appears to have widespread Democratic support.

But let's look beyond the hysteria.

Duncan estimates that, absent a federal windfall, budget cuts will force layoffs of 100,000 to 300,000 public-school staff and teachers. The American Association of School Administrators has projected 275,000 layoffs under current conditions.

Sounds pretty terrible: Six-digit job losses are certainly nothing to sneeze at, and no one wants to see people unemployed.

But these numbers — and the prophesying of Duncan & Co. — ignore some critical context.

The federal Digest of Education Statistics tells us that in the 2007-08 school year (the latest with available data), US public schools employed more than 6.2 million teachers and other staff. Losing 300,000 of those jobs would only be a 4.8 percent cut — unfortunate, perhaps, but hardly catastrophic.

And 300,000 is the worst-case scenario. The AASA figure of 275,000 would be just a 4.4 percent cut. The low end of Duncan's prediction, 100,000 positions, would constitute only a 1.6 percent trim. That's less than one out of every 60 public-school jobs.

Moreover, the projected cuts would be but a tiny step back after decades of spending and staffing leaps.

Between the 1970-71 school year and 2006-07, inflation-adjusted US public-school spending more than doubled, from $5,593 to $12,463 per pupil. The number of staff per pupil ballooned about 70 percent.

This might have been a fine investment — had it produced anything approaching commensurate improvements in achievement. But it didn't, according to scores on the National Assessment of Educational Progress — the so-called Nation's Report Card.

Indeed, while resources were blasted into the schools with a fire hose, test scores for 17-year-olds — essentially, our schools' "final products" — remained almost completely unchanged.

So the supposedly huge cuts we're facing are actually pretty small, and we've been pouring money and people into schools for decades without producing any improvements. Those are reasons enough to say "no way" to any federal bailout.

But that's not all the context that taxpayers deserve before Congress and the Obama administration stick them for another $23 billion. The American Recovery and Reinvestment Act — the "stimulus" — already included about $100 billion for education, most of which was intended solely to keep educators employed.

So there is indeed a looming education catastrophe — but it's not funding or job cuts. It is the bailout now moving through Congress that ignores the reality of inefficient public schooling, and adds to the already crushing burden of our federal debt.

Unfortunately, none of that seems to matter to Duncan & Co., who no doubt know the truth yet continue their Chicken Little act. All that matters to them, apparently, is that the unionized public-schooling establishment stays fat and happy.

No Consequences for Government Employees Who Charged Massive Shopping Spree to Taxpayers

May 24, 2010

FOXNews.com - Most employees caught stealing from a company would expect to be fired, forced to return what they took or worse. But a group of government employees accused of going on a massive shopping spree with taxpayer money have yet to face any disciplinary action.

During an 18-month period while the Federal Protective Service was moved from the General Services Administration to the Department of Homeland Security, employees spent thousands of government dollars on everything from clothing and flat-screen TVs to gym memberships and tuition payments, according to the General Services Administration inspector general's office.

But two referrals to federal prosecutors have resulted in no criminal charges in the case, The Washington Times reported Monday.

Investigators said the 21 employees hid more than $100,000 worth of "unauthorized" purchases made with government cards in 2003 and 2004 by not logging them into the computer system that processes the agency's financial transactions.

After the findings of the five-year investigation into the matter were revealed in September, three employees resigned, four retired and five employees faced possible reprimand. No action was taken against nine others, the Times reported.

The abuse of government charge cards is hardly a new problem.

A March 2008 report issued by Government Accountability Office estimated that “nearly 41 percent” of purchase card transactions made from July 1, 2005, through June 30, 2006 failed to meet “basic internal control standards.”

One cardholder embezzle more than $642,000 over 6 years from the Department of Agriculture’s Forest Service firefighting fund “for personal expenditures, such as gambling, car and mortgage payments” but wasn’t caught until a whistleblower turned her in, the GAO report said.

That cardholder was sentenced to 21 months in prison and ordered to pay restitution of more than $642,000.

In addition, the report said agencies were unable to locate 458 of the 1,058 expensed items the GAO had selected for testing, totaling over $1.8 million in missing goods like “computer servers, laptop computers, iPods, and digital cameras.”

Leslie Paige, a spokeswoman for the nonpartisan Citizens Against Government Waste, says more needs to be done to stop this kind of abuse.

"According to the report the FBS workers have absolutely had no consequences. And by consequences I mean punitive but also restitution,” Paige told FoxNews.com. “I don’t know why Congress is not moving to force them to claw the money back. There should be a claw back measure for sure when people have transgressed in this kind of a way whether it rises to the level of criminal prosecution or not."

Paige said since the last GAO report on the issue there’s been an “explosion” in the number of government purchase cards, with 300,000 federal employees currently carrying them. By turning a blind eye when they are abused, she says, the government is inviting more of the behavior.

“If the worst you get is not even a slap on the wrist, you’re not made to pay the money back, you don’t have your name published, you don’t get drummed out of your job, if there are no consequences for this behavior, you’re going to see more and more of it,” Paige said.

The Department of Homeland Security declined to comment over the phone and has not yet responded to emails from FoxNews.com regarding this issue.

Government Corruption and Treason

Cyber Command: We Don’t Wanna Defend the Internet (We Just Might Have To)

May 28, 2010

Wired – Members of the military’s new Cyber Command insist that they’ve got no interest in taking over civilian Internet security – or even in becoming the Pentagon’s primary information protectors. But the push to intertwine military and civilian network defenses is gaining momentum, nevertheless. At a gathering this week of top cybersecurity officials and defense contractors, the Pentagon’s number two floated the idea that the Defense Department might start a protective program for civilian networks, based on a deeply controversial effort to keep hackers out of the government’s pipes.

U.S. Cyber Command (“CYBERCOM“) officially became operational this week, after years of preparation. But observers inside the military and out still aren’t quite sure what the command is supposed to do: protect the Pentagon’s networks, strike enemies with logic bombs, seal up civilian vulnerabilities, or some combination of all three.

To one senior CYBERCOM official, the answer is pretty simple: nothing new. Smaller military units within U.S. Strategic Command coordinated and set policies for the armed forces’ far-flung teams of network operators and defenders. Those coordinators and policy-makers have now been subsumed into CYBERCOM. They’ll still do the same thing as before, only more efficiently.

“Doesn’t expand any authorities. It doesn’t have any new missions,” the official told Danger Room. “It really doesn’t add any significant funding… And really, it’s not a significant increase in personnel; we just reorganized the personnel have we had in a smarter and more effective way.”

That may soon change, however. A 356-page classified plan outlining CYBERCOM’s rise is being put into action. A team of about 560 troops, headquartered at Ft. Meade, Maryland, will eventually grow to 1093. Each of the four armed services are assembling their own cyber units out of former communications specialists, system administrators, network defenders, and military hackers. Those units – Marine Forces Cyber Command, the 24th Air Force, the 10th Fleet, and Army Forces Cyber Command – are then supposed to supply some of their troops to CYBERCOM as needed. It’s similar to how the Army and Marines provide Central Command with combat forces to fight the wars in Afghanistan and Iraq. Inside the military, there’s a sense that CYBERCOM may take on a momentum of its own, its missions growing more and more diverse.

Most importantly, perhaps, procedures are now being worked out for CYBERCOM to help the Department of Homeland Security defend government and civilian networks, much like the military contributed to disaster recovery efforts after Hurricane Katrina and the Gulf of Mexico oil spill.

In those incidents, it took days, even weeks for the military to fully swing into action. In the event of an information attack, those timelines could be drastically collapsed.

“There’s probably gonna be a very temporal element to it. It’s gonna need to be pretty quick,” the CYBERCOM official said.

Exactly what kind of event might trigger CYBERCOM’s involvement isn’t clear.

“From our perspective the threshold is really easy: it’s when we get a request from DHS,” the official noted. “What’s their threshold? I couldn’t tell you what their threshold is.”

The Pentagon might not even wait for an information disaster to move in. The National Security Agency is developing threat-monitoring systems for government networks dubbed Einstein 2 and Einstein 3. Deputy Secretary of Defense William Lynn believes those programs ought to extended to cover key private networks, as well.

“We are already using our technical capabilities… to protect government networks,” Lynn announced at the Strategic Command Cyber Symposium here. “We need to think imaginatively about how this technology can also help secure a space on the Internet for critical government and commercial applications.”

Einstein 2 is supposed to inspect data for threat signatures as it enters federal networks. Einstein 3 goes even further — alerting DHS and the NSA before the attacks hit.

“You’re starting to anticipate intrusions, anticipate threat signatures, and try and preventing things from getting to the firewalls rather than just stopping at the firewalls,” Lynn told Danger Room after his Cyber Symposium speech. (Full disclosure: I ran a panel at the event, and the military paid my travel costs.)

Given the NSA’s history of domestic surveillance, civil liberties groups fear that the Einstein programs could become a new way to snoop on average Americans’ communications. Lynn said not to worry:

“Individual users who do not want to enroll could stay in the ‘wild, wild west’ of the unprotected internet.”

“I think it’s gonna have to be voluntary,” he added. “People could opt into protection – or choose to stay out. Individual users may well choose to stay out. But in terms of protecting the nation’s security, it’s not the individual users [that matter most]. I mean, they have to worry about their individual [data], their credit rating, and all that. But it’s the vulnerability of certain critical infrastructure – power, transportation, finance. This starts to give you an angle at doing that.”

Privacy rights organizations and military insiders also wonder whether CYBERCOM is just another way to extend the NSA’s reach. After all, both organizations are headquartered at Ft. Meade. And both are headed by Gen. Keith Alexander.

The CYBERCOM official swears that won’t happen.

“It’s not NSA taking over military cyber,” he said. “And it’s not military cyber taking over NSA.”

Businesses Could Use U.S. Cyber Monitoring System

May 26, 2010

AP — A U.S. government computer security system that can detect and prevent cyber attacks should be extended to private businesses that operate critical utilities and financial services, a top Pentagon official said Wednesday.

William J. Lynn III, the deputy defense secretary, said discussions are in the very early stages and participation in the program would be voluntary. The idea, he said, would allow businesses to take advantage of the Einstein 2 and Einstein 3 defensive technologies that are being developed to put in place on government computer networks.

Extending the program to the private sector raises a myriad of legal, policy and privacy questions, including how it would work and what information — if any — companies would share with the government about any attacks or intrusions they detect.

Businesses that opt not to participate could "stay in the wild, wild west of the unprotected Internet," Lynn told a small group of reporters during a cybersecurity conference.

And in the case of Einstein 2 — an automated system that monitors federal Internet and e-mail traffic for malicious activity — companies already may have equal or superior protections on their networks.

"Einstein 2 is like a 1999 Mustang with a little rust," said James Lewis, a cybersecurity expert and senior fellow at the Washington-based Center for Strategic and International Studies. "For some companies it isn't a big deal. But for others who haven't done much (to secure their networks) it would be a good idea."

Lewis said the larger challenges would come with Einstein 3, a separate program being developed which would detect and actively block or prevent cyber intrusions.

Einstein 2 is in place in at least 11 of the 21 government agencies that police their own networks. The other 89 federal agencies will go through one of four major technology contractors for the Einstein monitoring. Einstein 3 is currently in a trial phase.

Managed and run by the Homeland Security Department, the two systems have triggered debate over whether they violate privacy. But the Justice Department concluded last year that it doesn't violate the rights of either the federal employees or the private citizens who communicate with them.

According to Lewis, there are questions about whether companies would share with the government information they collected on malicious Internet traffic. At the same time, the government would find it difficult to share some threat assessment information with industry because it may be classified. And companies might hesitate to share data with each other due to competitive concerns.

One Homeland Security official said the department and the Pentagon are working together to secure government networks, and are relying on private sector and government technical expertise to do that.

That experience will provide insight into ways to protect the privately owned and operated critical infrastructure, said the official, who spoke on condition of anonymity because discussions are in early stages.

Lynn and Air Force Gen. Kevin Chilton, commander of U.S. Strategic Command, on Wednesday also warned of escalating threats from cyber espionage and computer crimes. They called for more cooperation between the federal government and private industry, as well as between nations.

The Pentagon's creation of U.S. Cyber Command, which officially launched on Friday, will help the Defense Department protect its networks and enable it to better assist other federal agencies when they are hit with a cyber attack, Chilton said.

But he acknowledged it will be challenging to develop rules of cyber warfare, including what constitutes a cyber attack and what is an appropriate response. The new Cyber Command will be based at Fort Meade, Md., and it will report to the Strategic Command in Omaha.

U.S. computer networks face persistent attacks, including complex criminal schemes, suspected cyber espionage by other nations such as China, and possible terrorist probes seeking vulnerable systems or sensitive information.

Critics long have complained that defense officials have not yet detailed how and when the U.S. military should conduct cyber warfare, and what constitutes a computer-based attack that requires retaliation.

In other comments Wednesday, Lynn said the Pentagon is setting up a task force to find ways the massive agency can buy information technology programs and equipment more quickly. He said that while it takes the Defense Department as much as 81 months to fund and develop a new program, it only took Apple 24 months to develop the iPhone.

House Cybersecurity Overhaul Included in Defense Authorization Bill

May 28, 2010

nextgov.com - An amendment to the Defense authorization bill, expected to pass in the House on Friday, would push through committee efforts to update information security requirements for agencies and establish a separate cybersecurity office in the White House.

The fiscal 2011 National Defense Authorization Act, which moved to the House floor on Thursday, includes an amendment that would speed passage of existing measures from the Oversight and Government Reform Committee to overhaul federal cybersecurity.

"It was appropriate to attach this amendment to the Defense authorization bill because properly securing our cyber infrastructure is a national security issue," said Joy Fox, spokeswoman for Rep. Jim Langevin, D-R.I., who offered the amendment with Rep. Diane Watson, D-Calif.

The amendment would mandate agency use of automated monitoring to assess cyber threats. It would involve a major overhaul of the 2002 Federal Information Security Management Act, which often is criticized for forcing IT staffs to spend too much time and too many resources reporting about compliance with certain security procedures. Agencies also would be expected to incorporate security requirements into contracts from the start.

Other provisions in the amendment would establish a National Office of Cyberspace in the White House with budget authority over cybersecurity spending and governmentwide coordinating responsibilities, and codify posts of the federal cybersecurity coordinator, held by Howard Schmidt, and chief technology officer, who is Aneesh Chopra.

The amendment is based on H.R. 4900, sponsored byWatson, and H.R. 5247, sponsored by Langevin.

The security community has widely praised the provisions.

"This is an important step forward," said Allan Paller, director of research for the SANS Institute, noting he expects it will accelerate companion measures in the Senate and create "a real chance of major progress quickly."

Bill Gates Wants to Replace Public Schools with Contract Schools at Taxpayers' Expense

Bill Gates Touts Charter Schools

This is the best piece we've seen on what NCLB, charter schools, reorganizations and other false school reforms are really about

March 2008

The Progressive Review - The "Tough Choices or Tough Times" report of the National Commission on Skills in the Workplace, funded in large part by the Bill and Melinda Gates Foundation and signed by a bipartisan collection of prominent politicians, businesspeople, and urban school superintendents, called for a series of measures including:

(a) replacing public schools with what the report called "contract schools", which would be charter schools writ large;

(b) eliminating nearly all the powers of local school boards - their role would be to write and sign the authorizing agreements for the "contract schools;

(c) eliminating teacher pensions and slashing health benefits; and

(d) forcing all 10th graders to take a high school exit examination based on 12th grade skills, and terminating the education of those who failed (i.e., throwing millions of students out into the streets as they turn 16).

These measures, taken together, would effectively cripple public control of public education. They would dangerously weaken the power of teacher unions, thus facilitating still further attacks on the public sector. They would leave education policy in the hands of a network of entrepreneurial think tanks, corporate entrepreneurs, and armies of lobbyists whose priorities are profiting from the already huge education market while cutting back on public funding for schools and students.

Indeed, their measures would mean privatization of education, effectively terminating the right to a public education, as we have known it. Many of the most powerful forces in the country want the US, the first country to guarantee public education, to be the first country to end it.

For the last fifty years, public education was one of only two public mandates guaranteed by the government that was accessible to every person, regardless of income. Social Security is the other. Now both systems are threatened with privatization schemes. The government today openly defines its mission as protecting the rights of corporations above everything. Thus public education is a rare public space that is under attack.

The same scenario is being implemented with most of the services that governments used to provide for free or at little cost: electricity, national parks, health care and water. In every case, the methodology is the same: underfund public services, create an uproar and declare a crisis, claim that privatization can do the job better, deregulate or break public control, divert public money to corporations and then raise prices.

In the past year, it's become evident that the corporate surge against public schools is only part of a much broader assault against the public sector, against unions, and indeed against the public's rights and public control of public institutions.

This has been evident for some time now in New Orleans, where Hurricane Katrina's devastation is used as an excuse for permanently privatizing the infrastructure of a major American city: razing public housing and turning land over to developers; replacing the city's public school system with a combination of charter schools and state-run schools; letting the notorious Blackwater private army loose on the civilian population; and, in the end, forcing tens of thousands of families out of the city permanently. The citizens of New Orleans have had their civil rights forcibly expropriated.

Just as the shock of the hurricane was the excuse for the shock therapy applied to New Orleans, so the economic downturn triggered by the subprime mortgage crisis is now the excuse for a national assault on the public sector and the public's rights. . .

In public education, the corporate surge has grown both qualitatively and quantitatively. Where two years ago the corporate education change agents were mainly operating in a relatively small number of large urban areas, they have now surfaced everywhere. The corporatization of public education is the leading edge of privatization. This has the effect of silencing the public voice on every aspect of the situation.

Across the US, public schools are not yet privatized, though private services are increasingly benefiting from this market. However, increasing corporate control of programs - a different mix in every locale - is having a chilling influence on the very things that people (though not corporations) want from teachers: the ability to relate to and teach each child, a nurturing approach that nudges every child to move ahead, human assessments that put people before performance on standardized tests.

Perhaps the single most dramatic development of the corporate approach was the launching of the $60 million Strong American Schools - Ed in '08 initiative, funded by billionaires Bill Gates and Eli Broad. This is a naked effort to purchase the nation's education policy, no matter who is elected President, by buying their way into every electoral forum.

Ed in '08 has a three-point program: merit pay (basing teachers' compensation on students' scores on high stakes test); national education standards (enforcing conformity and rote learning); and longer school day and school year (still more time for rote learning, less time for kids to be kids. . .

Where two years ago charter schools were still viewed as experiments affecting a relatively small number of students, in 2007 the corporate privatizers - led by Broad and Gates - grossly expanded their funding to the point where they now loom as a major presence.

In March, the Gates Foundation announced a $100 million donation to KIPP charter schools, which would enable them to expand their Houston operation to 42 schools (from eight) - effectively, KIPP will be a full-fledged alternative school system in Houston. Also in the past year, Eli Broad and Gates have given in the neighborhood of $50 million to KIPP and Green Dot charter schools in Los Angeles, with the aim of doubling the percentage of LA students enrolled in charter schools. Oakland, another Broad/Gates targets, now has more than 30 charter schools out of 92. And, as we shall see below, the same trend holds across the country.

NCLB in 2008 is still a major issue. It continues to have a corrosive effect on public schools. It is designed an unfunded mandate, which means that schools must meet ever rigid standards every year, though no more money is appropriated to support this effort. This means that schools must take ever-more money out of the class room to meet federal requirements when schools with low test scores are in "Program Improvement". Once schools are in PI for 5 years they can be forced into privatization.

NCLB is a driving force that decimates the "publicness" in public schools. In California, more than 2000 schools are now in "Program-Improvement". This means that they have to meet certain specific, and mostly impossible standards, or they must divert increasingly greater amounts of money out of the classroom and into private programs.

For example, schools in 3rd year PI must take money out of programs that helped schools with a high proportion of low achieving schools and make it available to private tutors. . .

Privatizing public schools inevitable leads to massive increase in social inequality. Private corporations have never been required to recognize civil rights, because, by definition, these are public rights. If the corporate privatizers succeed in taking over our schools, there will be neither quality education nor civil rights.

The system of public education in the United States is deeply flawed. While suburban schools are among the best in the world, public education in cities has been deliberately underfunded and is in a shambles. The solution is not to fight backwards to maintain the old system. Rather it is to fight forward to a new system that will truly guarantee quality education as a civil right for everyone.

Central to this is to challenge the idea that everything in human society should be run by corporations, that only corporations and their political hacks have the right or the power to discuss what public policy should be. . .

The real direction is to increase the role and power of the public in every way, not eliminate it. . .

Biometric ID and Immigration Reform

U.S. Department of Homeland Security Issuing Next-Generation Green Cards With RFID

May 27, 2010

RFID Journal - LaserCard, a provider of secure ID solutions, has introduced a next-generation U.S. Permanent Resident Card (also known as a green card) featuring advanced optical security media and an EPC Gen 2 passive RFID tag. The company says it is not at liberty to disclose the manufacturer of the RFID tag or the tag model.

LaserCard's green card complies with the Western Hemisphere Travel Initiative (WHTI), a directive on land-border crossings that facilitates legitimate travel and trade at U.S. land borders.

Mailing of the new card by the U.S. Department of Homeland Security (DHS) to legal permanent residents began on May 10 of this year. The green card is issued to lawful permanent residents as evidence of their authorization to live and work in the United States.

LaserCard has been shipping quantities of the new card to the DHS for several months under a previously announced contract, the company reports, and has supplied the U.S. government's optical security media-based green cards since 1997. The new card exploits LaserCard's enhanced visual and forensic security features, and includes an RFID tag to provide compliance with the WHTI program.

According to LaserCard, the new green card is the first implementation of optical security media and RFID on a single card platform.

"We worked closely with the U.S. Citizenship and Immigration Services to develop the most physically secure and counterfeit-resistant identification credentials available today," said Bob DeVincenzi, LaserCard's president and CEO, in a prepared statement. "This new version with enhanced visual and physical security puts a credible copy even further out of the reach of counterfeiters."

Public Pension Perversion

Attack of the Public Employee Pensions

May 28, 2010

The Atlantic - Almost a decade ago, I discovered the fiscal time bomb of public employee pensions, and the threat they pose to municipal governments. It was 2002 when the fire union in Rancho Cucamonga, California began gearing up for contract negotiations. Enough time has passed that I can't recall the particular figures involved, but I do remember the political dynamic: Firefighters are always popular, the guys in that city were a likable bunch, and the September 11, 2001 terrorist attacks, fresh in the memories of every resident, made anyone in that uniform into an instant hero.

Imagine that you're a City Councilman in a place like Rancho Cucamonga, intent on keeping your seat, maybe even running for the Board of Supervisors or the California Assembly. The head of the fire union drops by your house one night. He lays out the salary increases, overtime policies, and pension setup he'd like to see -- even says maybe there should be one more firefighter on every engine during calls.

"I've got dozens of firefighters who'll be happy to spend their off hours knocking on the doors of registered voters, asking them if there's anyway the fire department can better assure the quality of their neighborhood, and suggesting that if they value the safety of their kids, they'd do well to vote for your opponent in the next election," the head of the fire union could say, without bluffing. "But I know you'll treat us fairly in the upcoming contract negotiations, and I don't see any reason it couldn't be you standing next to all the smiling guys in uniform when we send out a glossy endorsement mailer in advance of the vote."

That pressure is on one side of the scales, and counterbalancing it is the average politician's capacity for forward thinking, willingness to prioritize long term consequences, and innate fiscal conservatism. In other words, it is little surprise that Rancho Cucamonga firefighters are quite well-compensated, and can retire at age 50 while receiving 90 percent of their maximum salary for the rest of their lives.

To be fair, Rancho Cucamonga has an unusual interest in attracting the best firefighters -- the city is in the foothills, and its northern border is a tangled mess of sage scrub that ignites every so often in a mammoth firestorm that threatens lives and property. But it is hardly alone among cities that give lavish pensions to retired employees, often due to a political dynamic where public employee unions exerted extreme influence, and few had any incentive to push back against them, unlike in the private sector, where owners are pitted against union leaders to determine employee compensation from a fixed pie.

In the lede of a recent story on public employee pensions The New York Times offered this anecdote:

In Yonkers, more than 100 retired police officers and firefighters are collecting pensions greater than their pay when they were working. One of the youngest, Hugo Tassone, retired at 44 with a base pay of about $74,000 a year. His pension is now $101,333 a year.

It's what the system promised, said Mr. Tassone, now 47, adding that he did nothing wrong by adding lots of overtime to his base pay shortly before retiring.

"I don't understand how the working guy that held up their end of the bargain became the problem," he said.

Despite a pension investigation by the New York attorney general, an audit concluding that some police officers in the city broke overtime rules to increase their payouts and the mayor's statements that future pensions should be based on regular pay, not overtime, these practices persist in Yonkers.

The city has even arranged for its police to put in overtime as flagmen on Consolidated Edison construction sites. Though a company is paying the bill, the city is actually reporting the work as city overtime to the New York State pension fund, padding future payouts -- an arrangement at odds with the spirit of public employment, if not the law.

There are people who argue that it would be unfair to renege on the promise to pay Mr. Tassone six figures per year for the rest of his life. Granting their point, I'd ask a question in reply:

"Is it more or less unfair to pay this early retiree from the pockets of taxpayers working full time to earn a fraction of what he makes, all because he successfully exploited an ill-conceived law whose spirit he didn't honor, and the implications of which legislators scarcely understood?"

On the relevant New York legal questions, I plead ignorance, and wonder whether readers can enlighten me about whether his pension could be reduced under any circumstances. If so, I am unsure as to the wisdom of that course. Either you undermine the sanctity of contracts or else you lavish riches on retirees while countless residents suffer as a result.

That Mr. Tassone voluntarily takes the money every year is shameful, and he ought to be embarrassed in a way that few are anymore. That the system technically promises something does not make it his due, and whether or not he knows deep down that he is behaving indefensibly, that is the case.

Zooming out, let's return to The New York Times to examine the scope of the problem in that state:

According to pension data collected by The New York Times from the city and state, about 3,700 retired public workers in New York are now getting pensions of more than $100,000 a year, exempt from state and local taxes. The data belie official reports that the average state pension is a modest $18,000, or $38,000 for retired police officers and firefighters. (The average is low, in part, because it includes people who worked in government only part time, or just a few years, as well as surviving spouses getting partial benefits.)

Roughly one of every 250 retired public workers in New York is collecting a six-figure pension, and that group is expected to grow rapidly in coming years, based on the number of highly paid people in the pipeline.

This is arguably the biggest threat in America today to local governments with sufficient revenue to function efficiently. It should thus be of great concern to liberals and conservatives alike.

Perhaps the City of Vallejo, California is a sign of things to come elsewhere. It declared bankruptcy in a still-being-litigated effort to escape public employee obligations -- and as Reuters reports, other municipalities throughout the Golden State are tempted by the prospect of doing the same.

Meanwhile, here's the latest from the state's fund for retirees: it wants $600 million from a Golden State treasury that is already empty.

CalPERS, the nation's largest public pension fund, lost $55.2 billion, or a quarter of its value, during the 2008-09 fiscal year.

"The biggest reason why we need increases is the investment losses," said Alan Milligan, interim chief actuary for CalPERS. "Quite frankly, there's more to come."

If you live in a big city, odds are better than not that you're facing a public employee pension shortfall too. And that government employees are being afforded fringe benefits unavailable to the average citizen.

Public Pensions Bankrupting Los Angeles

May 5, 2010

ParaPundit.com - Richard Riordan, former mayor of Los Angeles, and Alexander Rubalcava, president of an investment advisory firm write in a Wall Street Journal Op-Ed that the city of Los Angeles is headed for bankruptcy. Read the whole thing.

Los Angeles is facing a terminal fiscal crisis: Between now and 2014 the city will likely declare bankruptcy. Yet Mayor Antonio Villaraigosa and the City Council have been either unable or unwilling to face this fact.

According to the city's own forecasts, in the next four years annual pension and post-retirement health-care costs will increase by about $2.5 billion if no action is taken by the city government. Even if Mr. Villaraigosa were to enact drastic pension reform today—which he shows no signs of doing—the city would only save a few hundred million per year.

Los Angeles shows us America's future. The rest of the country will catch up eventually.

The city assumes a ridiculous 8% annual return from its pension funds. The current mayor and city council are tools of the public worker unions. The city is going to keep squandering the taxpayers' money on overpaying public workers. That is part of a much bigger pattern of more rapid compensation increases in the government sector than in the private economy. That pattern is headed for a collision with a solvency crisis for many cities and states.

See Inevitable Bankruptcy Seen For Los Angeles and US States In Deeper Financial Trouble. I expect the sovereign debt problem in the US to hit in full force during the next recession.

Public Pension Reform: What Next for New Jersey?

May 25, 2010

BankruptingAmerica.org - Last week, we explored the problems facing the state of New Jersey and the steps that Governor Chris Christie has been taking to shore up the state’s finances. Governor Chris Christie has made an admirable effort to reduce the state’s deficit and to cut back the size of government. Yet much more work needs to be done.

It’s important for New Jersey citizens to realize that its over-sized state government isn’t just a problem because it has lead to out-of-control deficits. Too big government is in itself a problem: it crowds out the private sector and slows economic growth, making citizens less prosperous in the process. New Jersey needs to continue to scale back government spending.

New Jersey will also need to go much further in terms of pension reform. Governor Christie has advanced some modest changes to the pension system, but a lot more needs to be done. Also, Christie’s 2011 budget forgoes more than $3 billion in contribution to the state pension retirement system. This helps the immediate budget crisis, but exacerbates the long-term problem of unfunded pension liabilities.

New Jersey could look to Illinois for guidance for reforming pensions, since Illinois just passed its own set of pension reforms. Under the new Illinois pension laws, new-hires will have to wait until 67 to retire (some current state workers can retire at age 55). Illinois also capped salaries, which can be used as a basis for calculating pensions and limiting cost-of-living increases. These reforms are good in preventing the build up of future liabilities, but do little to address the considerable liabilities that have already been incurred.

New Jersey will have to go further and make sensible changes to payouts for current and near retirees, while revamping the system for younger workers so that the pension system becomes financially sound. It’s unfair to the private sector that provides the resources to the government for the public pension system to act as an anchor on the state’s economic growth and consume so much taxpayer resources ...

Trillion-Dollar Pension Crisis Looms Large Over America
America's future? U.S. cities going bust
Facing the Nemesis: Will the Pension Crisis Bankrupt the United States?
The Coming Armageddon; Bankrupt States, Public Pensions, and “Sovereign Immunity”
Why Is Congress Intent on Helping Unions Bankrupt Our Country?

Cell Phones and a Cashless Society

Mobile Network Operator and Visa Begin Mobile Payments Pilot in Spanish Resort

May 28, 2010

NearFieldCommunicationsWorld.com - 1,500 customers of Telefónica and La Caixa have been issued with Samsung S5230 NFC phones which they can use to make debit and credit card payments in taxis, sports centres, at market stalls and in retail stores.

The pre-commercial NFC trial in the Spanish resort of Sitges, announced in February, has gone live.

The 'Mobile Shopping Sitges 2010' pilot is being led by mobile network operator Movistar, part of the Telefónica group, La Caixa and Visa and includes the participation of Gemalto, Giesecke & Devrient, Samsung, Ingenico and the Sitges city council.

1,500 customers of both Movistar and La Caixa have been chosen to participate in the pilot and can use their Samsung S5230 NFC phones to make payments using their La Caixa credit or debit card accounts at 500 merchants in the town.

Transactions valued at up to €20 can be made without a PIN and larger transactions can be carried out provided the customer enters their PIN on the keypad of the merchant's POS terminal to confirm the purchase.

Each of the pilot's participants are being given training on how to use their phones and a website providing comprehensive information on the new service and how it works has been set up by Telefónica at http://www.mobileshopping.es/.

"Telefónica will expand the offer to use its technology to other banks, and expects that La Caixa will partner with other platforms in addition to Visa," Kim Faura, head of Telefonica's Catalonia region, has told Europa Press.

The pilot is scheduled to last for six months. Participants will not be required to return their NFC phones at the end of the pilot, however, as there are plans to both continue the service in Sitges and to expand it to the city of Barcelona, just 35km up the coast from the resort.

The start of the Sitges pilot is the second of a pair of significant moves towards the adoption of NFC by Telefónica to take place in the last seven days. Earlier this week, we reported that the company's first commercial NFC service has gone live in the Czech city of Pilsen and that Telefónica's business strategy for NFC deployments is now in place. An NFC bus ticketing trial is also due to go live in the near future in Lima, Peru.

Mobile Network Operator Launches Mobile Phone Payments in Czech Republic — and Sets Out Strategy for Future Deployments

May 27, 2010

NearFieldCommunicationsWorld.com - The mobile network operator Telefónica is starting small with a limited rollout in the Czech city of Pilsen, but a business strategy is now in place and commercial launches in the UK and Spain could be next.

Telefónica O2 Czech Republic has put a limited number of NFC phones, pre-loaded with the local Plzeň transport and city services card, on sale in the Czech city of Pilsen.

The launch of the new service marks the first time that Telefónica, which offers mobile services in sixteen countries in Europe and Latin America, has offered NFC phones on a commercial basis to its subscribers. For the launch, Telefónica O2 subscribers can obtain a Nokia 6212 Classic NFC phone on a contract for 495 crowns (US$24), or without a contract for 4495 crowns (US$216), from any of the operator's six stores in Pilsen.

The Plzeň card is issued by the city's regional transport operator PMDP and allows local residents to pay for public transport, purchase tickets to local events, make payments in local stores and receive special cardholder-only discounts. Some 230,000 local residents currently hold a Plzeň card.

"Now anyone can buy a mobile phone that supports NFC and start benefiting from this service," says Michael Kraus, CEO at PMDP. "I know of no other city in Europe where [there is] NFC technology in commercial operation."

Preparations

At Telefónica's head office in Madrid, meanwhile, preparations are gathering pace for the introduction of larger scale commercial deployments in the near future.

Technical development work in now complete, Michiel Van Eldik, Telefónica's group director for new business and innovation, has told NFC World, and a business strategy for NFC services is now in place. Key to that strategy, says Van Eldik, is an understanding that "money will go mobile" and that "the biggest favour we could do ourselves as an industry is to recognise that there is money to be made for all of us."

"It has to be based on partnerships," he added, explaining that his experience working on Telefónica's mobile health initiatives has taught him the value of each party being responsible for its own area of expertise. So, while Telefónica has a banking license in some countries, cooperation with other service providers will be the way ahead, Van Eldik says. "We could try and become doctors, but that would be the biggest mistake we could make," he explains.

Telefónica's strategy, therefore, is multi-layered, involving a number of different business and consumer propositions with the aim of providing solutions that work for all. Currently, they include:

• Co-branded products. Telefónica has signed a deal with Visa Europe that will see the introduction of services, similar to the UK's existing O2 Money product, across all the European countries in which Telefónica currently operates. Here, the operator will partner with a Visa-card-issuing bank in each country and, in exchange for its business, will receive a share of transaction revenues or, as Van Eldik neatly puts it, "we will take a slice of the dice." A similar deal is also set to be signed with either Visa or MasterCard for the Latin American market in the near future.
• Existing card products. A number of pricing models are under consideration to enable banks and other card issuers to add their products to Telefónica subscribers' NFC phones, although the operator currently favours a straight rental fee.
• B2B customers. For merchants and other service providers, Telefónica will offer a range of products and services "that work out-of-the-box" and will also offer tools for developers, including APIs and toolkits.

Before any large scale launches can take place, however, phones must pass the scrutiny of Telefónica's consumer focus groups. Since its phones are subsidised, Van Eldik explains, decisions over which handsets the operator should offer are only made after in-depth customer research has been conducted — and "they must see a clear advantage" before a device can be offered to subscribers.

That said, in volume, the operator is now expecting to pay a premium of just US$5 to have NFC functionality built into its phones. That means, Van Eldik says, that if a sufficiently strong case can be made for being able to generate revenues from NFC service provision, it is possible that this premium would not be passed on to the customer.

Performance issues

The need for reliable handsets is also still a potential stumbling block. Performance issues with the Samsung S5230 NFC phone became apparent during the NFC trial conducted at the Mobile World Congress in February. Telefónica plans to use the same phone for the pre-commercial pilot it will be running in Sitges, Spain from June this year and, says Van Eldik, the operator has been working very closely with Samsung and with its NFC SIM supplier Giesecke & Devrient since February to ensure the phone meets its performance requirements in time for the launch.

A large scale trial is also due to begin in Peru soon, which will see commuters in the city of Lima able to use NFC phones to purchase bus tickets and, says Van Eldik, we are "running a few trials with stickers" and "we are looking at some other solutions too."

Where will the first major commercial launches take place? Spain, the UK, and the Czech Republic are the furthest ahead of the countries in which Telefónica operates, says Van Eldik, with each having the potential for expansion in late 2010 or early 2011.

"In these countries, we are seeing more and more evidence of market readiness and we at Telefónica are most advanced in our developments," he concludes.

Meanwhile, Pablo Montesano, Telefónica’s director for new businesses, told delegates attending the Mobile Money Summit in Rio de Janeiro this week that the operator estimates that it could ultimately generate US$1.5 billion from mobile financial services.

"The last 18 months have been important to our understanding," he explained. "We consider financial services one of the biggest opportunities within the group."

Montesano also confirmed the operator's commitment to a partnership model, the GSMA's Mobile Business Briefing reports:

"Telefonica is looking at an open model whereby it could share the spoils with several partners, he said. And Telefonica does not believe in 'the silo approach' and is prepared to work with other mobile operators to see services become successful. Montesano has had to convince colleagues internally that co-operation rather than competition is the way to go.

Mobile money is also a rare opportunity to create value both for shareholders and the wider society, said Montesano: “Even a one percent inclusion of the unbanked creates a significant improvement in reducing inequality.”

Electronic Health Records

Growing Urgency in Developing Healthcare IT Standards

May 26, 2010

Federal Computer Week - As the Department of Health and Human Services works to simplify currently cumbersome and complex standards for health information technologies, especially regarding standards that govern the exchange of information about patients, overarching concerns about privacy and security continue to grow.

In recent months, the Health Information Technology Policy Committee, for example, reached a consensus on the definition of ‘meaningful use’ recommended to describe what healthcare providers must do with their e-health systems to qualify for financial incentives the federal government will offer starting in October 2010. For instance, hospitals must generate 10% of their orders via computerized physician order entry by 2011 to qualify for a portion of the more than $20 billion Health Information Technology for Economic and Clinical Health (HITECH) portion of the American Recovery and Reinvestment Act.

One barrier to standards adoption so far has been the lack of a unique set of standards. Except for standards already federally mandated, such as those governing Health Information Privacy Act (HIPAA) transactions, there are a number of competing and overlapping messaging and data vocabulary standards and in many cases, CSC officials assert that none sufficiently address current healthcare IT requirements. CSC officials cited LOINC or SNOMED for medical lab tests. LOINC adequately addresses the lab test orders but SNOMED is needed for the test results. CSC officials report there’s a strong need for ongoing work to build upon, create new or harmonize existing standards schemas.

Separately, HHS officials understand that standards and certification are needed to identify and harmonize technical specifics related to health information exchanges. To accomplish this, HHS reports there is a need to oversee the development and presentation of use cases, to coordinate work with the Health IT Standards Panel (HITSP) and the Nationwide Health Information Network (NHIN) effort, and to support the certification efforts of the Certification Commission for Healthcare Information Technology (CCHIT) in its certification and accreditation activities. Commission-approved criteria and test scripts, developed during the current development cycle, have been published on the web site, www.cchit.org.

HITSP, for example, is a multi-stakeholder, consensus-based body designed to provide a process for representatives from all aspects of healthcare to select and harmonize standards to support specific healthcare priorities. Currently, volunteers from over 500 healthcare-related organizations support and participate in HITSP. In 2009, HITSP focused on ‘meaningful use’ and ARRA’s eight priorities, which include:

* Technologies that protect the privacy of health information;

* A nationwide health information technology infrastructure;

* Use of a certified electronic record for each person in the U.S. by 2014;

* Technologies that support accounting of disclosures made by a covered entity;

* The use of electronic records to improve quality;

* Technologies that enable identifiable health information to be rendered unusable/unreadable;

* Demographic data collection including race, ethnicity, primary language and gender;

* Technologies that address the needs of children and other vulnerable populations.

Meanwhile, CCHIT certifies provider-based ambulatory care, EHRs and inpatient EHRs through a public-private process that develops specific criteria for health IT systems and then rigorously evaluates them to determine whether they meet criteria for:

* Functionality – ensuring that the systems can support the activities and perform the functions for which they are intended;

* Security – ensuring that systems can protect and maintain the confidentiality of data entrusted to them; and

* Interoperability – ensuring systems implement the recognized standards and can exchange information and work with other systems.

In 2010 and beyond, healthcare IT standards development will largely hinge on an open source market-driven process – underscored by the need to understand operational goals in building each product or service. According to recent research from INPUT, federal government spending on open source software is expected to grow from $290 million in 2009 to $430 million in 2014, (a CAGR of eight percent).

At a recent Harris Corp.-sponsored Washington D.C. conference on healthcare IT, Brian Behlendorf, a Collaboration Advisor within the Office of the National Coordinator for Health Information Technology said the development of standards for healthcare IT will largely depend on the creation of new open source technologies, and will replicate the success of other technologies currently on the market, such as open source web servers and browsers.

“FHA has very aggressive goals to achieve nationwide health information exchange, which means we must create reusable technologies in as many places as we can,” he said.

... The community of stakeholders, providers, payers, agencies and state/local governments will drive the development of key health IT services.

“FHA’s role is as facilitator of the process,” he said.

And by the looks of it, FHA is having great success. At recent code-a-thons that took place in late 2009, FHA pulled programmers from a variety of organizations to developer events that were attended by more than 10 times the originally expected number of software developers.

Ultimately, the process of accelerating the adoption of health IT standards will not happen overnight. It’s an ongoing effort that will require the participation of all stakeholders in order to succeed. The standards required within the HITECH provisions of ARRA will force changes to existing applications and interfaces, along with the adoption of yet-to-be-finalized new standards to meet interoperability requirements, CSC officials maintain. Compliance to those standards is tied to the financial incentives offered, so it’s critical for state and local governments and healthcare providers to assess their current installations and begin planning for what will be needed to meet the 2011 incentive deadline.

Greek-style Austerity Measures

IMF Calls for Gradual Rise in Japan Sales Tax

May 19, 2010

* IMF: Japan should gradually increase consumption tax
* Country should start fiscal reform in 2011
* Japan recovery gaining momentum, deflation to end late 2011

Reuters - Japan should start fiscal consolidation next year, including gradually raising the country's sales tax, taking advantage of solid growth now, the IMF said on Wednesday.

The recommendation by the International Monetary Fund contradicts Prime Minister Yukio Hatoyama's pledge not to raise the sales tax rate at least until the next lower house election, which does not need to be held until 2013.

"With global scrutiny of public finances increasing, the need for early and credible fiscal adjustment has become critical," the IMF said after its annual review of Japan's economy and economic policies.

"In our view, fiscal adjustment should start in 2011/12, beginning with a gradual increase in the consumption tax, to take advantage of cyclical recovery," the IMF said.

Japan's outstanding debt as a ratio of gross domestic product is the highest among industrial nations.

Investors are on edge over countries with large debt burdens after a crisis of confidence in Greece's fiscal policy roiled financial markets and prompted the European Union to roll out a $1 trillion rescue package to defend the falling euro.

Some market players think Japan could become the next target of markets, although many market players think the country can muddle through at least in the near future because of huge domestic savings.

"Our assessment is that there's limited risk of any kind of sovereign debt event (in Japan). But no matter how small the risk is, it must be a bit higher as a result of recent events. That suggests a need for early action. The fact that the economy is showing strength now shows it is a propitious time to begin adjustment," an official at the IMF said.

The IMF said the Japanese recovery is gaining momentum and that prices in the country will start rising in late 2011.

GDP data due on Thursday is expected to show the economy grew an annualised 5.4 percent in the first months of this year.

The IMF also said the BOJ's easing steps have helped stabilise financial markets and support the economy.

But it added the BOJ could consider additional easing measures such as extending the maturity of the central bank's fund-supplying operations.

Europe Facing Strikes Over Austerity Packages

Spain's parliament has passed a €15bn (£12.7bn) austerity package by just one vote, leaving the Socialist government nakedly exposed to popular fury.

May 27, 2010

London Telegraph - Its glaring lack of political solidarity is the latest sign of rising resistance to deflation policies across the eurozone.

Prime minister Jose Luis Zapatero had to rely on the abstention of Catalan nationalists to push through public sector wage cuts of 5pc this year and a freeze in 2011.

The 1930s-style pay squeeze was effectively imposed upon Spain by Brussels as a quid pro quo for the EU's €750bn "shield" for eurozone debtors. It is a bitter climb-down for a workers party that vowed to resist salary cuts. Public sector unions have called a strike on June 8 to protest an act of "ultimate aggression" against the people.

The conservatives voted against the measures, prompting a fiery rebuke from finance minister Elena Salgado.

"Unpatriotic, irresponsible, and hardly very European: one day they will pay for this," she said.

The measures include cancellation of the €2,500 "baby cheque" and lower pension benefits. Mr Zapatero hopes to cut the deficit by an extra 1.6pc over GDP over two years, though unemployment is already 20pc. The deficit will fall from 11.2pc in 2009 to 6pc this year.

Raj Badiani from IHS Global Insight said cuts may not be enough. The government is relying on growth projections that are "far too optimistic" to do the heavy lifting of the deficit reduction.

In Italy, the main CGIL trade union is launching two sets of strike in June to protest "unjust and unsustainable" cuts announced on Tuesday night, claiming that axe falls squarely on ordinary workers.

"Those who earn over €500,000 won't have to put up a single cent," it said.

Premier Silvio Berlusconi said the sovereign bond scare sweeping the eurozone had forced Italy to build up a security buffer.

"This crisis has been provoked by speculation and is like no other. These sacrifices are necessary to save the euro," he said.

The €24bn austerity package (1.6pc of GDP) over two years aims to cut the bloated bureaucracy, chiefly by reducing grants to regional governments.

"Italy's spending is out of control: this irresponsible system worked as long as we could devalue the currency," said Mr Berlusconi. "

Indoctrinating Our Youth

Today's College Students Lack Empathy

May 28, 2010

Live Science - College students today are less likely to "get" the emotions of others than their counterparts 20 and 30 years ago, a new review study suggests. Specifically, today's students scored 40 percent lower on a measure of empathy than their elders did.

The findings are based on a review of 72 studies of 14,000 American college students overall conducted between 1979 and 2009.

"We found the biggest drop in empathy after the year 2000," said Sara Konrath, a researcher at the University of Michigan's Institute for Social Research.

The study was presented this week at the annual meeting of the Association for Psychological Science in Boston.

Is "generation me" all about me?

Compared with college students of the late 1970s, current students are less likely to agree with statements such as "I sometimes try to understand my friends better by imagining how things look from their perspective," and "I often have tender, concerned feelings for people less fortunate than me."

"Many people see the current group of college students - sometimes called 'Generation Me' - as one of the most self-centered, narcissistic, competitive, confident and individualistic in recent history," said Konrath, who is also affiliated with the University of Rochester Department of Psychiatry.

Konrath's colleague graduate student Edward O'Brien added,

"It's not surprising that this growing emphasis on the self is accompanied by a corresponding devaluation of others."

Other recent studies have shown mixed results on the character of today's youth. For instance, one study of more than 450,000 high-school seniors born at different time periods showed today's youth are no more self-centered than their parents were at their age.

The role of media

Even so, Konrath and O'Brien suggest several reasons for the lower empathy they found, including the ever-increasing exposure to media in the current generation.

"Compared to 30 years ago, the average American now is exposed to three times as much nonwork-related information," Konrath said. "In terms of media content, this generation of college students grew up with video games, and a growing body of research, including work done by my colleagues at Michigan, is establishing that exposure to violent media numbs people to the pain of others."

The rise in social media could also play a role.

"The ease of having 'friends' online might make people more likely to just tune out when they don't feel like responding to others' problems, a behavior that could carry over offline," O'Brien said.

In fact, past research has suggested college students are addicted to social media.

Other possible causes include a society today that's hypercompetitive and focused on success, as well as the fast-paced nature of today, in which people are less likely than in time periods past to slow down to really listen to others, O'Brien added.

"College students today may be so busy worrying about themselves and their own issues that they don't have time to spend empathizing with others, or at least perceive such time to be limited," O'Brien said.