A Feeble Swipe at Identity Theft

The FTC has decided to lay down the law on identity theft:

The government says that businesses have the responsibility of making sure thieves don't use stolen information to buy goods or open phony accounts. And to that end, the Federal Trade Commission wants businesses that might be targets of identity thieves to develop written plans to spot "red flags" that fraud could be involved and prevent it.

...."Once the information is in the hands of identity thieves, there's not much more the consumer can do," said Naomi Lefkovitz, senior attorney for the FTC, which will oversee enforcement of the rule as it applies to many — though not all — businesses. "Now it's in the hands of the businesses."....A department store that issues its own credit cards, for example, would qualify as a creditor under the new rule, and would have to develop a plan, according to the FTC.

Ha ha. Just kidding. The FTC isn't laying down the law. What they're actually doing is requiring businesses to "develop a written plan for identifying signs of identity theft." That's almost as toughminded as, say, putting together a blue ribbon commission to write a report on the problem.

Here's a data point to ponder. In 1968 Congress passed the Truth in Lending Act. Among other things, it capped consumer liability for lost credit cards at $50. Guess what happened? Since credit card companies were responsible for all the losses above that amount, they got very aggressive and very creative at figuring out ways to minimize fraud. They made it as convenient as possible to report a lost card. They provided merchants with loads of tools to identify lost cards. They developed computer algorithms to detect usage patterns so they could proactively shut down fraudulent use. They worked really, really hard on this stuff.

In a nutshell, we made banks responsible for the losses, and banks figured out ways to prevent losses. It was the wonder of free market capitalism at work.

Now then, suppose credit issuers were responsible for the costs of identity theft? That is, if you're responsible for issuing a card or extending credit of any kind under false pretenses, you're responsible for the losses and you're responsible for cleaning up the mess. Period. No excuses, no safe harbors, no nothing. If you extend credit to someone named Kevin Drum with my Social Security number, and it turns out that it wasn't actually me you extended credit to, then it's your problem. You pay the charges, you cancel the cards, you clean up my credit report, you contact my bank, you do everything. The basic premise should be: it's your responsibility to make sure you're extending credit to the person you think you are. If you don't, it's your responsibility to fix the mess. And if you don't fix the mess, you'll be liable in court for substantial damages.

What do you think would happen if that was the rule? Easy: banks and credit issuers would miraculously discover that there are lots of ways to tighten things up. Instant credit might become less popular, replaced by having to apply for a card and wait a few days for approval. Credit reporting bureaus would offer their credit protection services for free. (In fact, they'd beg you to sign up.) Credit locking — in which you have to actively allow access to your credit report on a case-by-case basis — would become the default, instead of a hassle that few people take advantage of. And those nifty computer algorithms that have helped with credit card fraud would turn their gimlet eyes on identity theft as well.

Right now, the reason identity theft is such a pain isn't usually the money involved. Quite often, in fact, the amount of lost money is fairly modest. What makes it a pain is that, basically, nobody except you cares about it. You're responsible for contacting your bank, your credit card company, the credit reporting bureaus, and a dozen other firms, none of whom really care about your problem and wants only to pass you along to someone else as quickly as possible.

There's no reason we should put up with this. Responsibility should lie with those who are at fault. If you extend credit carelessly, you should clean up the mess. And it wouldn't even be that hard. Hell, if we merely mandated credit locking instead of making it optional, it would probably eliminate about 95% of all identity theft. Applying for credit might take a day or two longer than it does now, but is that really such a bad thing? Or, perhaps we could mandate credit locking by default, and allow you to unlock your account only if you agree to accept full personal responsibility for any identity theft that might ensue.

Instead we're getting "written plans." Blecch. Perhaps our shiny new Consumer Finance Protection bureau will be able to do a bit better once financial reform is passed and it gets up and running.

Taking Sarah Seriously

Sarah Palin and White House Press Secretary Robert Gibbs dueled it out this weekend:

Pointing to what she termed the White House's relationship with "the oil companies who have so supported President Obama in his campaign and are supportive of him now," Palin questioned whether "there's any connection there to President Obama taking so doggone long to get in there, to dive in there, and grasp the complexity and the potential tragedy that we are seeing here in the Gulf of Mexico."

Gibbs, on CBS News' "Face the Nation," suggested Palin do some homework...."My suggestion to Sarah Palin would be to get slightly more informed as to what's going on in and around oil drilling in this country."

OK, I guess that's not bad. And since I read Jon Alter's The Promise last week, I'm still sort of stuck in Alter's universe, where Obama is the adult who insists on always taking the high road against his opponents and always turns out to be right about that. And hey, maybe so. Maybe he's right to be exasperated with people who are endlessly advising him to get more partisan and more fiery. And maybe he's right to insist that his staff act the same way he does.

Maybe, maybe, maybe. But honestly. Isn't it time for guys like Gibbs to finally just say something like, "Bob, we're not still treating anything Sarah Palin says as actual news, are we? Let's move on." After all, even Bob Schieffer can't possibly take it seriously when Sarah Palin — Sarah Palin! — suggests that Barack Obama has failed to "grasp the complexity" of the oil spill.

Shilling for America

Matt Yglesias and Ezra Klein are both in China on some kind of junket, and both are complaining about the corporate shillishness of the American pavilion at the Shanghai World Expo. One of the videos that comprise America's message to the world, says Ezra, is just a "long series of advertisements from the pavilion's corporate sponsors, including a representative from Chevron who tells us that oil will have to be part of our energy future and actually uses their marketing buzzwords 'human energy.'" But hey — that's a World Expo for you. Compare and contrast this to a souvenir coin from the 1939 Golden Gate Expo in San Francisco, which happily informs us that "A dollar spent for petroleum products never stops circulating. It pays for wages, taxes, materials and brings countless benefits to every business." Indeed. And still does, apparently.

Anyway, I have no real point to make. I just wanted an excuse to post a picture of that coin again.

The End of Lost

So: what did you think of the Lost finale? I gotta say, when the show's creators told us a few months ago that they weren't going to answer every question, I was OK with that. Gotta maintain an air of mystery, keep the focus on characters instead of obsessing over minutiae, etc. etc. But honestly, I wasn't expecting them to answer no questions. Shouldn't they have at least answered one or two just as a demonstration of good faith?

Crankery 101

Here's a quick rule of thumb: You can judge the Crank Factor™ of an op-ed about the financial crisis by how long it takes the author to say something like:

Yet in truth, it was government housing policy that was at the root of the crisis.

It takes AEI president Arthur Brooks about a thousand words to get there in the Washington Post today. That wouldn't be too bad, actually, except that it's a 2,500-word piece. That's about 40% of the way in, so let's give Brooks a CF of 60. Frankly, I think he could have done better.

I can't figure out why conservatives insist on repeating this nonsense. The evidence against it is overwhelming, so they can hardly be unaware that they're BSing. (Details here.) And usually you save BSing for arguments that actually have some traction. But this one doesn't. As near as I can tell, even tea partiers don't really buy it unless you throw in a bit of CRA/minority lending demagoguery — which, at least in this piece, even Brooks doesn't quite have the brass to try to pitch. Maybe he saves that for the Wall Street Journal crowd.

Anyway, you can add "government housing policy caused the financial crisis" to this handy list of phrases that immediately let you know that you've been sucked into reading not a judicious exposition of conservative thought, but the most vapid, PowerPointy form of right-wing crankery:

  • Supply side economics: Arthur Laffer showed that tax cuts pay for themselves.
  • Healthcare: It can take as much as a year to get a hip replacement in Canada.
  • War on terror: Saddam Hussein supported al-Qaeda.
  • Tax policy: Half of all Americans don't pay any taxes.
  • Climate change: McIntyre and McKitrick have shown that global warming is a fraud.

Roughly speaking, no one who's actually serious about any of these topics would write any of this stuff. If you see it, it's as much a flashing light as pining away for the gold standard or railing about the giveaway of the Panama Canal. Got other examples? Feel free to add to the list yourself. And conservatives are welcome to construct a similar list for liberals. Have at it, folks.

Off to Chicago

In a few weeks Marian and I are going to Chicago to visit for a few days. Aside from the obvious (Art Institute, Magnificent Mile, Field Museum), any recommendations? All help much appreciated!

Friday Cat Blogging - 21 May 2010

Ah, the glories of a wide angle lens. Domino looks like she's a furry python or something. If furry pythons also had whiskers and paws, that is. Over on the right, we have a repeat of last week. What can I say? Inkblot was out in the garden again yesterday, Marian plonked him down on a rock, and this is the picture that came out. Anyway, I figure it won't be spring forever, so we should enjoy the flowers while we can.

(And what is Inkblot looking at? Birds, of course. There's a nest in our neighbor's tree nearby and the birds get pretty territorial about the whole thing. But their strategy is bad. All their chirping and buzzing just makes Inkblot all the more curious. Luckily for them, he's also gravity bound and has a short attention span. So they're in no danger.)

Pakistan and the Times Square Bomber

ProPublica fills in a few more details on the Times Square bombing:

U.S. and Pakistani investigators are pursuing a new lead in the failed Times Square bombing: That a major in Pakistan’s army knew of Faisal Shahzad’s plans to attack U.S. targets months before Shahzad tried to ignite a car bomb in the heart of New York City.

....Pakistani authorities arrested the military officer this week, officials said. U.S. investigators have been told by Pakistani officials that the major learned of Shahzad's plans from another suspect who is accused of funding the operation, according to a senior U.S. anti-terror official. The major has since resigned from the military, said the official, who requested anonymity because the case remains open.

....Allegations about the major, if confirmed, would deepen U.S. concerns about the role of the Pakistani military and intelligence in the fight against terrorism....The former military man was arrested not by the ISI, Pakistan's most powerful spy agency, but by a military intelligence service. While the ISI has played a central role in the Times Square investigation and in other major terror cases, the spy service and other branches of the security forces have also periodically been accused of colluding with Islamic extremists.

Oddly enough, we seem to have gotten this information from Shahzad without torturing him. Probably just a lucky break. Via Spencer Ackerman.

From right-wing Texas State Board of Education member David Bradley, explaining who should be included in history books and who shouldn't:

I am very reluctant to include persons who are still alive. By definition of “history,” you must be dead, because you never know when you might embarrass us later.

Actually, that might be the only sensible thing he has to say on the subject of history. I mean, look at Rand Paul. You just never know, do you?

Stuck in Neutral

Paul Krugman says the United States isn't in any danger of turning into Greece:

The truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

.... It’s not that nobody understands the risk. I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

That's true. But the core problem is that growing government debt is a problem in the long term. Ideally, then, what we'd do is gather support for a strong stimulus now by credibly promising to address our various fiscal imbalances in the future. But how do we do this? As far as I know, it's not possible. There's simply no way to guarantee future behavior in any way that the market would take seriously. So we're stuck.