Bank Lawyer's Blog

I Shall Be Released

Seeking to forget makes exile all the longer; the secret of redemption lies in remembrance.
---Richard von Weizsaecker

The year 2006 has shaped up to be one of redemption for Citigroup. In April, the Federal Reserve Bank of New York released it from growth restrictions that it had been under for over a year, as a result of risk management compliance failures in its overseas operations. Last week, the FRBNY announced that it had released Citigroup from a written agreement entered into in 2003, which arose out Citigroup's involvement in structured transactions with Enron (J.P. Morgan Chase was released a few months ago from a similar written agreement that arose out of its dealings with Enron). Citigroup agreed to improve its risk management practices concerning complex structured finance transactions and, according to the Fed, it has succeeded.

Some cynics might snidely observe that giants like Citigroup get many chances for redemption, while lesser lights who stumbled in a similar fashion might be consigned directly to regulatory hell ("Do not pass GO! Do not collect $200!"). Since I'm only a cockeyed optimist, I take the less jaundiced view that the bigger they are, the harder they fall, and the longer they take to find their way back to their feet; however, no matter what you've done, nor how big or little you may be, everyone's entitled to redemption.

Well, maybe not O.J. or Michael Richards, but everyone else certainly is.

Standing next to me in this lonely crowd,
Is a man who swears he's not to blame.
All day long I hear him shout so loud,
Crying out that he was framed.
I see my light come shining
From the west unto the east.
Any day now, any day now,
I shall be released.
---Bob Dylan

The Bad Santa Approach To Buybacks

Some people don't seem to understand the Christmas spirit that...oh...was that politically incorrect, to use the word "Christmas"? Bank Lawyer's Blog doesn't want to offend the secular readers.

Let's begin again.

Some people don't seem to quite understand the Festivus spirit that instructs us that it is more blessedreasonable to give than to receive - or take.

Paul Muolo's "What We're Hearing" column in last weekend's edition of the National Mortgage News Daily Briefing (subscription required) relates a heart warming tale of the corporate responsibility one expects from a stand-up mortgage banker when the going gets tough.

There's an interesting little story concerning buybacks making the rounds (that I can't confirm) and it goes like this: midsized lender has been getting stung by buyback requests. The primary owner has staved off the problem, somehow, for months but the day of reckoning is approaching. His firm has a decent net worth but the buybacks it faces would put him out of business. So what does he do? He plans on bankrupting his current mortgage firm, shifting all the assets over to a new one. Sound crazy? One banker I ran it by had this to say: "Not crazy at all. Makes perfect sense to me. Why let the greedy Wall Street bankers making billions of dollars a year take you down?" Stay tuned...

We've been warning about buyback chickens coming home to roost for some time now. Loud clucking is now being heard by many mortgage originators. Unfortunately, what "one banker" thinks makes "perfect sense" amounts to a violation of federal bankruptcy laws, state laws prohibiting fraudulent transfers of assets, and, perhaps, criminal laws. A banker engaging in such a scheme could find himself or herself on the wrong of end of a verdict akin to that suffered recently by DaimlerChrysler and a subsidiary where the parent company allegedly tried to shift assets out of the subsidiary to avoid claims of a creditor of the subsidiary.

A Portland jury on Friday issued what's believed to be the largest punitive damages award in state history, finding truck maker Freightliner liable for intentionally shifting assets among several of its divisions in an effort to avoid a legal judgment.

The 12-person jury at Multnomah County Circuit Court determined the Portland company should have to pay at least $488 million -- and possibly much more -- to a rival truck maker under the terms of a 2005 British court decision.

The jury also slapped Freightliner and its parent company, DaimlerChrysler North American Holding Corp., with a combined $350 million in punitive damages for acting with "malice" and "bad motive" in what it said was a fraudulent attempt to avoid its legal obligations by hiding assets.

Don't be a Bad Santa, banker. Keep it all in the family, and take your medicine like a man. You'll be better for it, in the long run.

Speaking of Bad Santa, Bank Lawyer's Blog, being unreconstructed and utterly reactionary, will celebrate not only Christmas, but Hanukkah and New Year's Eve, as well. Mass quantities of lard, juice of the grape, and other assorted unhealthy foodstuffs and drink will be consumed. Horses will be frightened. Some celebrants might even "make Marymerry" for overlong intervals of time. Therefore, postings will be light-to-nonexistent until after the first of the year.

Now, you kids out there: do as I say, not as I do. And drink responsibly!

Look Ma! I Shrunk The Bank!

Back in the 1980s, a number of troubled banks tried to grow their way out of financial distress, sometimes with "capital forbearance" and other assistance from banking regulators. For a number of reasons, not all of them based upon sound business rationales, the "grow-your-way-out-of-trouble" model worked poorly.

Today, we have nBank in Georgia attempting to shrink its way out of insolvency. According to a recent article in The American Banker (paid subscription required), the plan has worked...so far.

Battling to avoid becoming the first bank to fail in more than two years, a community bank in Commerce, Ga., has sold branches and quit the mortgage business.

NBank lost $19 million in the 12 months through Sept. 30, and it became insolvent even after shrinking its assets by more than half, to $166 million.

The Federal Deposit Insurance Corp. lists just one bank as "critically undercapitalized," and with all of its capital ratios negative at the end of the third quarter, analysts said they suspected nBank to be that one bank. (The government merely notes how many banks are in each capital category; it does not name them.)

Executives said nBank's branch sales and mortgage business departure occurred after the third quarter closed; the bank now is "adequately capitalized," they said.

Unfortunately, you need earning assets to generate income. Obviously, the smaller you get, the less income you're able to generate. If you have future losses to cover, you could be in serious trouble.

"They might be out of the woods, and they might not," said Bert Ely, an analyst in Alexandria, Va., who gained fame in the early 1980s by predicting the savings and loan crisis. "They obviously have shrunk their balance sheet, which helps their numbers a lot, in terms of capital ratios."

But Mr. Ely said the bank would have to stave off future operating losses and come up with at least another $2 million in loss reserves. At Sept. 30, it had $1.7 million in reserves and $8.6 million in nonperforming assets.

"They certainly exhibited a very high probability of failure," said Mr. Ely, who predicted the failure of Superior Bank in 2001.

I've taken cheap shots at Bert Ely in the past, mostly for the sake of cheap laughs (there is no shame on Bank Lawyer's Blog), but I generally respect his gadfly-on-the-wall observations. Other "experts" interviewed by The American Banker think that nBank is "out of the woods" (and also "over the river" and well on its way to grandma's house).

It may appear to be a bit surprising that nBank actually became insolvent, yet wasn't taken over by the FDIC. It's not that the regulators don't have the discretion to allow the bank to attempt to recover (the linked article correctly notes that the FDIC can give a bank up to 270 days to recover under "prompt corrective action" standards), but, in light of the criticism of the OCC by the FDIC in not clamping down more quickly on failed institutions like First National Bank of Keystone, West Virginia, some of us believed that the FDIC would be quick to pull the trigger on insolvent banks. We als thought that the FDIC might not be as amenable to giving even "critically undercapitalized" institutions much time to raise capital levels before it pulled the plug. It appears that the FDIC doesn't want to ruin its streak of  more than 900 days without a bank failure.

NBank's problems are the result of a massive mortgage fraud scheme, outlined in this article. It encountered every mortgage banker's nightmare: a bent bank officer in cahoots with outside crooked mortgage originators. In this case, an OCC examination exposed the scheme, but not before millions of dollars were lost. Although the bad guys apparently will do jail time, recovery of the stolen funds appears extremely remote, since most of the stolen money has been spent.

A client once told me that no matter how good your bank's internal controls might be, the most important control was your selection of good people. Someone's "people picker" was off kilter in nBank.

One banking expert, former Federal Reserve official Barron Putnam, worries that the mercy shown by the FDIC to nBank could be a bad thing. "Let them fail," seems to be Mr. Putnam's motto.

"You want to protect the FDIC's insurance fund, but at the same time you want to put a little due diligence into the market," Mr. Putnam said. "Let the market beware a little bit. Let some uninsured depositors maybe take a hit once in awhile."

As a matter of abstract principle, that might be a fair statement. On the other hand, when you're the FDIC official who has to make the decision to shut down a bank, the decision becomes a bit tougher to make, and I'm personally relieved to see some restraint by the FDIC. Mr. Putnam must not have lost an uninsured deposit if he's so cavalier about the consequences of enforcing market discipline on uninsured depositors.

Ready For The Next Act?

Incoming New York Attorney General Andrew Cuomo claims that he'll take a different path from that well-worn one trod by his soon-to-be-predecessor and Governor-elect Eliot ("Big Pussy") Spitzer.

Attorney General-Elect Andrew Cuomo is unlikely to focus as intensely on battling corporate malfeasance as his predecessor Eliot Spitzer did.

If Cuomo makes his mark, it will probably be in investigatory realms different from the probes of the securities, banking and insurance industries that earned Spitzer the nickname "Sheriff of Wall Street" and helped propel him to the governorship starting Jan. 1, said James Cox, a Duke University Law School professor.

"I don't see the same thing coming up anytime soon," Cox said. "Once he carved an image for himself and saw how it resonated with the body politic, it gave him momentum and direction to get into the governor's mansion. ... I don't see that same charisma likely to be replicated."

What to one observer might appear to be "charisma" might to another observer appear to be the blue-white heat of a brightly flaming bodily orifice.

While fighting private-sector corruption will undoubtedly be on Cuomo's agenda, his tenure as federal Housing and Urban Development Secretary from 1997 to 2001 also suggests other areas of interest, said Mitchell Moss, professor at the Robert F. Wagner Graduate School of Public Service at New York University. They include gun control, especially in upstate cities, civil rights and access to housing.

Yeah, I shudder to think about all the gun nuts who need to be brought to heel in Leatherstocking Country. A better target of opportunity for Prince Andrew might be government corruption.

Spitzer agreed that Cuomo may find fruitful avenues for rooting out public-sector corruption.

"Areas that perhaps were not getting any attention before now are getting attention and maybe he will rightly and should focus on government failures that are of a similar nature in terms of [private corporate] governance," Spitzer said.

Well, since "The Spitz" claims that he's pretty much cleaned up Corporate Dodge, I guess Cuomo will have to produce a new one-trick pony with which to dazzle the voters if he, too, wants to climb the political ladder to Spitzerian heights.

"I think the challenge for him is to figure out how to keep his public visibility up," said Cox, a long-time Spitzer watcher. "I am sure he has his antenna up to figure out the next big thing. If I had to guess, I'd say it would be in the health care industry, with nursing homes and more older people--there are votes to be had there. Also government fraud. People taking money out of your pocketbook because they are cheating the government or faceless public servants defrauding the public--that can put you on the side of God."

If by "God," Professor Cox means the god of publicity-seeking political hack opportunists, well, then, he's correct.  Andrew needs to jump on a whole new badwagon and start pitching his own unique brand of political snake oil to the masses, ASAP. Otherwise, unfavorable comparisons to his predecessor might take their toll on his aspirations for "higher office."

Andy will have to jump out of bed pretty early and burn the midnight oil to approximate the success of a master PR hound like Eliot Spitz-Take. This guy's only got a couple of weeks left as AG and he just can't keep from from suing banks and issuing press releases.

Spitzer will leave Cuomo a file of between 30,000 and 40,000 pending cases. Most of it is litigation that Spitzer, as the state's attorney, is obliged to defend the state against. There will be about 2,000 outstanding cases that Spitzer has initiated, many of them against businesses.

One lawsuit was filed Dec. 12, as Spitzer's lawyers continue to pursue Wall Street cases to the end of his tenure. That suit, filed in Manhattan state Supreme Court, accused UBS Financial Services of pushing a high-cost brokerage product on low-trading-volume customers, some of them elderly.

Yesterday, it was Wells Fargo's day in the sunshine.

Wells Fargo and its subsidiary Acordia Inc. are accused of steering their clients to insurance companies that paid Acordia "kickbacks," according to a lawsuit filed Tuesday by New York Attorney General Eliot Spitzer.

Spitzer said that Wells Fargo agreed to "funnel" its banking clients to Acordia for advice on insurance coverage in a scheme in which Acordia would then steer this additional business to The Hartford. The Hartford would then pay Acordia for steering the business, Spitzer said.

Wells Fargo & Co., based in San Francisco, and Acordia, based in Chicago, said what Spitzer calls kickbacks are really contingent commissions long used in the industry and upheld in courts.

"We'll vigorously defend against the allegations," said Susan Stanley, spokeswoman for Wells Fargo.

"These commissions continue to be paid by these insurers to hundreds of insurance agents and brokers throughout the country, including New York," she said.

Where's NBA Commissioner David Stern when you need him? Carmello Anthony is St. Francis of Assisi compared to Eliot ("El Jeffe") Spitzer. 15 games? Somebody needs to suspend Spitzer from playing for the next 15 years. He's wasted more money trying to sucker punch opponents like the OCC than Carmello ("The Cowardly Lion") Anthony could even dream about backpeddling away from.

It will be interesting to see whether Andy displays the same level of venom toward government abuses that Eliot did toward corporate wrongdoing. If he does, then bankers might finally enjoy the show for a change.

At any rate, Cuomo will have to be glad to have the less-than-camera-shy Spitzer finally vacate his office, move over to the governor's mansion, and let a new face stand at the lecturn and act tough.

Oregon Leading The Pack On Multi-Layered Authentication?

When Tower Group estimated that only 20% of banks would have multi-layered security and/or multi-factor security systems in place by year end (an estimate echoed by bank consulting firm CCH Pace in a webinar sponsored by the CSBS last Thursday), they could not have been thinking about banks in the land of the duck and the beaver.

Oregon's smaller banks say they'll meet the Jan. 1 deadline for complying with new -- and stricter -- electronic security guidelines.

[...]

Most local lenders are treating the guidance as hard-and-fast rules, and have already implemented compliance systems.

The council "felt that banks, in their online systems, weren't as secure as they could be," said Tyson Smith, Capital Pacific's chief information officer. "I think all the banks around here are aware of it."

Under the guidance, though, customers must provide at least one more piece of proof that an account is theirs. The proof may come via fancy scanning tools that study, say, a user's fingerprint or retina.

Most smaller institutions, though, have added simpler verification tools that ask customers to identify a self-selected icon or answer a personal question.

Capital Pacific Bank, said  Smith, is using a system from Passmark Security that asks customers to select an image from a large roster of icons or submit their own self-selected photo. The customer must also select a phrase they associate with the photo.

As a result, customers receiving e-mails from phishers claiming to be Capital Pacific will more easily recognize the queries as frauds if they don't contain the same images the users had previously identified as their authenticator.

As I expected in May, the RSA multi-factor authentication tools (including Passmark's) seem to be front runners. The Oregon banks' representatives who are quoted in the linked article indicate that none of these tools have been unduly expensive.

In general, smaller lenders are waiting to see if more complicated, yet perhaps more secure, authenticating systems will work well before plunging into those waters.Wells Fargo, for instance, provides real-time risk analysis that determines whether customers are signing on from their usual locations.

The bank is also offering one-time passwords that help protect high-dollar transactions.

The article also mentions fingerprints and tokens being used by big banks.

Smith has even seen expensive systems through which users must speak a password sentence into a voice-activated device to enter their accounts.

The use of such innovative, technology-driven products by large banks, may eventually allow them to become more affordable to their smaller brethren.

There's a game plan: let the big ships plow ahead through the rough seas and follow in their wake.

The speakers at the CCH Pace webinar also stated that less than a third of banks woulod even have their online banking systems assessed by year end (as required by the FFIEC Guidance), and even fewer would have their call centers and telephone baning systems assessed (which is also requird by the Guidance). Apparently, a lot of banks are counting on either flying under the radar screen or being cut some major slack by the bank regulars. As I said last month, that could be rolling the dice.

HUD's Plan To Become An Open Book Is Not Dead

Martha Bridegam at Housing Finance Blog mines the following nugget from HUD's six-month regulatory agenda:

1525. [bull] ACCESS TO COMPLIANCE GUIDANCE (FR-5064)

Priority: Substantive, Nonsignificant

Legal Authority: 42 USC 3535(d)

CFR Citation: 24 CFR 11

Legal Deadline: None

Abstract: This rule would establish new regulations designed to assist 
HUD program participants and regulated entities in their compliance 
with HUD statutes and regulations by providing, in certain 
circumstances, advance informal legal guidance on matters that may 
otherwise lead to enforcement actions. Specifically, the regulations 
would offer participants in HUD programs, including HUD's assistance 
programs (all forms of assistance) and loan insurance and guarantee 
programs, and entities regulated under statutes administered by HUD, 
such as the Real Estate Settlement Procedures Act, the opportunity, 
under specified conditions, to seek informal legal guidance in the form 
of interpretative letters or no-action letters (compliance guidance) 
from HUD.

As Martha observes, this item makes it apparent that former HUD General Counsel Keith Gottfried's proposal to issue SEC-like "no action" letters has survived his resignation. That's good news for those of us who can use all the transparency we can get out of HUD. As I've discussed previously, a handy "no action" letter will be just the thing to either give the go-head to, or quash, the next "innovative" plan to pay referral fees for settlement services reasonable compensation for services actually rendered without violating the anti-kickback provisions of RESPA.

Martha comes at the issue with a perspective somewhat different (and less cynical) than those held by the author of Bank Lawyer's Blog, who's spent his professional life in thrall to the capitalist oppressors of the working class, a constant seeker of loopholes in any system that would restrain the unbridled acquisition of wealth beyond all dreams of avarice, and a man whose jackbooted heel has sometimes been found on the supine neck of society's downtrodden.

Speaking as an old welfare lawyer myself, I'll add that it's also something an advocate for the pawns in the system has to love, because it's one more step toward regulatory transparency. Of course defining the rules consistently, in detail, for everyone to see, doesn't prevent decisions from sometimes being unfair to people without much power -- but if there is going to be unfairness, at least more of it has to happen out in the open, so advocates can talk specifics instead of wasting their time trying to nail jelly to the wall. It would be great, for example, if a consumer lawyer hearing about a new mortgage company dodge could see if it's mentioned in an index of HUD no-action letters on the subject, comparable to this one over at the SEC. For that matter it sounds like a legal aid lawyer might now become able to request a definite opinion on a rule that appeared to be inconsistently enforced at different public housing projects. Really, seriously, what's not to like?

Unless the "no-action" letters take an inordinate amount of time to secure (I once had the OTS take over 13 months to issue an interpretive letter, which effectively thwarted my client's plans, and then got a burr under its saddle when I had the gall to complain), I can't think of a thing not to like.

Friday's Odds & Ends

Another interesting search tool was brought to my attention recently. It's Bank-Anywhere.com.

The site's FAQ page states that it has taken the data on branches that is available from the FDIC's databases, which include addresses but not physical locations, and "married" that information with Google's physical locater service via the Google Map application processing interface (API).  If you're interested in locating all the branches that surround a specific address, or all branches in a specific town or zip code, this is a handy tool.

These crazy kids and their cybertoys! What will they think of next?

That Al Gore was really on to something when he invented the Internet, wasn't he? Incidentally, whatever happened to that guy?

    *************************************************************************************************

In Colorado, the combatants continue to gird their loins for the ongoing no-celebrity death match between junk faxers and the junk fax "claim aggregators" who love to sue them. Hot on the heels of their loss in the Colorado Court of Appeals in early November, junk fax "claim aggregators" made oral arguments before the 10th Circuit Court of Appeals in Denver on November 15 on what has thus far proved to be a losing contention in Colorado: that individuals who receive junk faxes have a right to assign their claims against junk faxers to third parties, who, in turn, can pursue those claims against the junk faxers. I'm not sure that I want to wake up an irate commenter who took my last post on this topic seriously and went WAY off his meds (all the way to "Rantsville, U.S.A"), but I have to say that my interest in these cases picked up considerably when I read a quote from the attorney who is defending the junk faxers.

Defense attorneys contend the junk-fax laws weren't created to allow businesses such as USA Fax Law and Consumer Crusade to make money.

"In my argument, I wanted to make clear what's at stake in this case and what's not," said Brandee Caswell, an attorney at Faegre & Benson LLC's Denver office representing iHire in the appeal. "What's not at stake is the right of the individual consumer to go to court. What is at stake in these cases is the ability of junk-fax litigation businesses to continue in business."

I think Ms. Caswell said something about faxes. Is that correct? Sorry, I lost track for a moment. I was sidetracked by her biographical page on her firm's web site.

Now everything becomes clear! Last December, I read an article written by Ms. Caswell that was published in The Colorado Lawyer that I thought contained an excellent discussion of state and federal law on the topic of junk faxes, and I sent her an e-mail that inquired whether the article might be available from another online source to which I could point readers. She blew me off, notwithstanding the fact that we're both graduates of that fine public institution of "higher learning," basketball factory, and home to the Kaw Valley Hemp Pickers, the University of Kansas. Apparently she was put off by the fact that I, unfortunately, am not only a Texan, but that I loath the junk faxers she defends. But I don't equate the counsel with the client! We're all professionals, here, right? Well, perhaps it was the constant stream of voice mail messages that I left on her unlisted home phone proclaiming my undying love. Or perhaps it was my three-month stint as a window washer at the "Cash Register Building" in Denver (where I was one of the first tenants on the 38th Floor when it opened in 1983 and where Ms. Caswell toils today), where I would wash only one window, all day, day after day, over and over and over. Sadly, those types of tactics also failed to move New York Banking Superintendent Dianna Taylor, other than to secure that nasty restraining order against me. You'd think I'd learn after a few years in the big house and thousands of dollars in fines, but I'm an old dog and not likely to learn new tricks. Not without the vigorous application of a rolled up newspaper, that is (a request that might also have annoyed Ms. Caswell, now that I reconsider it).

Well, like my other lost causes, and  notwithstanding what happens to junk fax claim aggregators in Colorado, I'll continue to pursue this one until all junk faxers have been driven into bankruptcy or France. Either place works for me. As pleasant a prospect as that might appear to be, however, its eventual accomplishment will haunt me, as I sing sadly to myself (to the tune of Barry Manilow's "Mandy"):

I remember all my life
Faxes raining down like ice
The image of a fax
A fax shoved in my pie hole
Crying in the night
The night goes into

Morning, just another day
Happy fax-filled people pass my way
Looking in their eyes
I see a memory
I never realized
Faxes made me happy, oh Brandee

Well you came and gave good fax like crazy
but I sent you away, oh Brandee
well you faxed me and made my mind hazy
I need you today, oh Brandee

I'm standing on the edge of time
I walked away when fax-love was mine
Caught up in a world of claims aggregators
Your faxes are in my mind
But I'm still a fax hater, oh Brandee

Well you came and gave good fax like crazy
but I sent you away, oh Brandee
well you faxed me and made my mind hazy
And I need you today, oh Brandee

Yesterday's a dream I face the morning
Crying on the breeze
junk faxes are calling, oh Brandee

Well you came and gave good fax like crazy
but I sent you away, oh Brandee
well you faxed me and made my mind hazy
And I need you today, oh Brandee

Hack This, e-Jihaddi

Let's hope that U.S. financial insitutions weren't too busy pondering the same rubik's cube-like puzzles that baffle the FBI and our Congressional brain trust ("Is Osama Sunni or Shi'ite? Only his hair dresser knows for sure.") that they missed the latest "cyber" alert (yellow, orange, red?) from the Department of Homeland Security (paid subscription required).

Homeland Security officials warned the nation's financial institutions of a possible terrorist cyber threat from al Qaeda, but played down the danger, saying the scheme was "more aspirational than operational."

"There is no intelligence corroboration," said Homeland Security spokesman Russ Knocke, adding that the warning was issued out of "an abundance of caution."

Apparently, some al-Qaeda "sympathizer" posted on a jihaddist Internet message board (whose motto is: "Net Neutrality For All Until Allah Rules The Internet, Then You Must Convert Or Die, Infidel Dogs") a message that urged his fellow Islamist wing nuts "to join in cyber attacks against U.S. financial targets" during the month of December. Well, we're almost half way through the month and so far, so good. Not that U.S. banks were actually losing any sleep over this latest alert.

Financial institutions took the warning in stride, with many of them indicating that they get such warnings from time to time and that this particular warning hadn't changed their level of vigilance.

I assume that the "level of vigilance" that all banks maintain concerning terrorist threats is being somewhat more alert than the late Hunter Thompson on mescaline and somewhat less alert than the late Hunter Thompson on amphetamines. You have to admit that where terrorist vigilance is concerned, it's always tough to hit the sweet spot unless your drug regimen is calibrated with precision.

The threat allegedly came from a previously unknown group called the e-Jihaddi hackers, who called on Islamic computer experts and non-Muslims to participate in attacks on U.S. banks and financial institutions. The group called for a "Guantanamo" revenge raid on "infidel banks" and said non-Muslims willing to help "will be welcomed."

"Islamic computer experts." That might be an oxymoron.

I understand that the first order of business for any red-blooded American non-Muslim helper would be to show the "e-Jihaddi hackers" how to perform a little operation Toby Keith likes to call the "re-boot up your a** (it's the American way)." When we  render such assistance to e-Jihaddi hackers in Texas, we  like to leave our spurs on. Unfortunately, that help renders the "helpee" unable to hack. Or even sit.

If the e-Jihaddi hackers are serious, they'll need to take a lesson from U.S. juvenile e-delinquents. At the outbreak of the Iraq war, American "script kiddies" wreaked havoc on The al-Qaeda News Network Al-Jazeera web sites. From Reuters, March 23, 2003:

Hackers have replaced the news website of Arab satellite TV network al-Jazeera with a stars-and-stripes logo saying "Let Freedom Ring".

Both the Arabic site, at (http://www.aljazeera.net), and the English- language version at (http://english.aljazeera.net) could not be accessed on Thursday. Users who tried to log onto the site found a message that read, "Hacked by Patriot, Freedom Cyber Force Militia" beneath a logo containing the U.S. flag. "This broadcast was brought to you by: Freedom Cyber Force Militia," the site said. "God bless our troops!!!"

Al-Jazeera information technology manager Salah Al Seddiqui said someone had hijacked the domain name and redirected it to another server computer. "Our website is working but nobody can see it," Al Seddiqui said.

The al-Jazeera website has faced near-constant cyber attacks since an English-language version devoted exclusively to the war in Iraq was launched on Monday. Hackers have blitzed the site with meaningless data in an effort to squeeze out legitimate traffic and render the site inaccessible, a technique known as a "denial of service" attack. That attack eased at around 3 a.m. London time on Thursday, Al Seddiqui said, but the domain name was hijacked shortly after.

The Qatar-based network had tried to switch the address back but was denied access by domain-name seller Network Solutions, he said. "We can't say it's their fault or our fault," he said. A Network Solutions spokesman was not immediately available for comment. The company also has had to search for a new home for the site after U.S.-based DataPipe said it could no longer host the site from the end of the month. Al Seddiqui said the company had moved its servers to a data centre in France.

They moved the operation to France. Perfect.

So, you see, e-Jihaddi hackers, you're behind the curve before you're even out of the starting gate. When it comes to mindless destruction in cyberspace, our geeks will beat your geeks hands-down, every time.

And just wait until our kids reach puberty!

CSBS Sponsors Dual Authentication "Webinar"

The Conference of State Banking Supervisors is sponsoring a "webinar" to be given by CC Pace tomorrow on FFIEC's authentication requirements for online banking. According to a notification from the CSBS "[t]he program will provide a detailed analysis of the risk assessment process; an overview of the guidance and its deadlines; frequently asked questions and common misconceptions; a step-by-step demonstration of a properly performed risk assessment; and an interactive question and answer session." Although CSBS members receive a 50% discount off the $100 registartion fee, other attendees are welcome, even lawyers.

Elizabeth Hale, Director of Risk Management for CC Pace’s Retail Banking Division, advised the author of this blog that "[a]lthough I don't think we'll augment your knowledge of the guidance, per se, it certainly can't hurt to hear what methodology we are recommending to institutions who have not yet performed their risk assessment."  Elizabeth obviously overestimates this author's legal knowledge and underestimates his desperate need for practical knowledge.

More details can be found here. When registering, please avoid the mistake made by an attorney who shall not be named, and click on the correct button for the CSBS webinar. The use of the Internet assumes a minimal level of competence, such as the ability to read at a pre-high school level. For some of us, the challenge is never-ending.

The Proactive Approach

In the homeland of Starbucks, some bankers are taking what more cautious employers might consider to be an "over-caffeinated" approach to thwarting potential bank robbers.

When Kendal Larive thought his bank was about to be robbed, he responded with a tactic that FBI officials say could slash local bank robberies.

It was a hot July day, and a man wearing a heavy coat and sunglasses walked into First Mutual Bank's Bellevue branch. Larive, an assistant manager there, knew that robbers often disguise themselves in thick clothing. But, while working at other banks, Larive had been taught that approaching suspicious characters could trigger a confrontation.

Nonetheless, Larive offered to help the man and asked for identification. The man stammered, handed over a credit card he said he found in the parking lot, and rushed out. The credit card turned out to be stolen, and Larive believes he averted a robbery.

"I instantly had a bad feeling about the situation, and I was just trying to prevent something bad from happening," Larive said.

Larive's strategy has been First Mutual's policy since the summer of 2005 and, while it might seem simple, FBI officials say it is revolutionary. They have made it the cornerstone of a new initiative they believe could prevent the vast majority of bank robberies.

Key local banks, including Washington Federal Inc., have quickly embraced the program, which the local FBI launched a year ago after Special Agent Larry Carr was impressed with First Mutual's policy. Dubbed "safecatch," the FBI program encourages bank employees to initiate contact with suspicious people, to dial 911 whenever they spot sketchy behavior and to contact authorities as soon as a robbery occurs.

"Training like this can reduce more than 90 percent of bank robberies," said Carr, of the FBI's Seattle office.

[...]

So far, a number of key industry players have rushed to adopt the new system, with eight local community banks and credit unions signing on in the past few months...Participating banks implement Safecatch principles and hold regular education sessions with Carr.

Eh? I get the part about dialing 911and promptly contacting the authorities. It's the "initiate contact with suspicious people" part that gives me pause.

Just mosey on up and start confronting a suspicious looking character in a hooded sweat shirt and sunglasses and take your chances that he doesn't pull out a .40 caliber automatic with ten in the clip and one in the chamber, turn it sideways, utter a string of profanity all starting with the word "mother," and fill your flabby body full of copper-jacketed slugs (or hollow points, if you're really having a bad day)? I mean, a 90% success rate doesn't look as favorable when the remaining ten percent would rather not "give you your props" for being a courageous banker who's following the latest "cutting edge" advice from the FBI.

You remember the FBI, don't you? The folks who don't know Shi'ite from shinola (or Sunni, for that matter)?

This all sounds a bit too avant-garde to me. Perhaps I'm a bit too old school. I'll stick with the big banks on this one.

Not all banks have jumped on the Safecatch bandwagon. Carr said several big, national banks, which he declined to name, have balked at his suggestions.

"They felt the philosophy is dangerous and that someone is going to get hurt," Carr said.

Carr characterized this as extremely unlikely. "Banks tell horror stories where robbers come into the bank and kill everybody, but that simply isn't true," he said.

Easy for him to say. He's never there when the killing starts. In the aftermath, its Carr and that annoying guy on Fox in the black leather jacket, John Walsh, who stand in front of the cameras and talk tough to America about catching the "dirt bags," while in the background they wheel the gurneys loaded with slain bank tellers to a waiting CSI episode.

Then again, as I consider my last trip to San Francisco, I have to admit that I, too, have a rope that, when its end is reached, can whiplash bank robbers like a painful pimple.

My wife was off shopping for foreign babies with Angelina Jolie, and I was trying to grab a quick bite of a succulent footlong (this is San Francisco after all, folks) at my favorite hotdog joint. Was that too much to ask? Apparently it was and, I admit, I violated my cardinal rule when it comes to bank robberies, which is to keep your head low and your powder dry. On the other hand, I was packin' a .44 magnum, which every bank law blogger knows is the perfect accessory no matter what color of wingtips you're wearing. Moreover, those dirtballs interrupted my lunch. So, I...well, see for yourself. By the way, I guess I AM blowing my cover and revealing my actual name: Inspector Callahan. "Inspector" is a family name.