Bank Lawyer's Blog

FDIC Solves Subprime Crisis

Last night, a reader alerted me to Damian Paletta's breaking news in The Wall Street Journal that the FDIC's Sheila Bair had assisted the Treasury Department by proposing a dandy little scheme to spend $50 billion in taxpayer funds to bail out one million subprime borrowers with low-interest loans. Obviously, the plan has a lot more to it than that, but why waste any more breath on it than Treasury Secretary Paulson did today.

Paulson said he will "look carefully" at the FDIC plan, while emphasizing his confidence in the Hope Now Alliance of lenders spearheading a private effort to modify home loans.      

"It's only fair to point out our priority is doing the things we're already doing administratively, doing the things we're already doing working with the private sector," he said. "That's where we are, that hasn't changed, despite my high regard for Sheila."

A blatant brushoff if I've ever read one, complete with a not-so-coded "despite my high regard for Sheila." That reminds me of a parenthetical in a recent post by Yves Smith at Naked Capitalism in which he asserted that female regulators might be better suited to cracking down on the good-old-boy business of banking: "(the horrific example of Sheila Bair notwithstanding)."

A financial advisor for a private equity fund e-mailed me today with this question regarding Bair's proposal: "What the **** has this got to do with the business of the FDIC?"

Not a damn thing. It's got everything to do with Sheila Bair's personal agenda, however. In a lame duck administration, there's apparently no one making her do the job she was hired to do.

The preliminary puzzled reactions are nicely summarized by Paul Jackson at Housing Wire, if you're interested. A more "spirited critique" is contained in this post at Market Ticker (the answer to his question is "yes.") I'm consigning this to the same dust bin where I filed the OTS' proposal on negative capital certificates (although I have much more respect for the OTS and John Reich). Wake me up when someone with power starts taking an interest and pushing it forward.

Shooting down Sheila is like bringing down the Goodyear Blimp "Snoopy 2" with a surface-to-air missile. There's not much sport left in it.

Sheila's Singing The Same Old One-Note Samba

Sheila Bair won't quit. Like the Everyready Bunny, she just keeps going, and going, and going, on and on, singing the same old tired, sad, off-key tune. The fact that her intended audience continues to passively-aggressively ignore her when she talks to them and, when her back's turned, to give her a derisive middle finger, not only doesn't discourage her, it apparently energizes her. Obviously, she's deep into the D/S scene, and not on the "dominant" side of role playing.

In today's The Wall Street Journal, reporter Michael Crittenden faithfully reports yet another public yap-fest by Sheila in which she berates "[p]olicymakers, banks and other players in the housing market" for continuing to review loan portfolios "loan-by-loan" instead of just grabbing huge fistfuls of subprime loans and implementing "a more systematic approach to moving homeowners into more affordable loans." In other words, damn the facts and rational analysis, damn concepts of equity, damn what people in the mortgage business might consider to be in their own best financial interest, full speed ahead!

A normal, rational person who heads a powerful government regulatory agency might actually start to rethink a position if those who are supposedly subject to her influence pay her lip service, then continue doing things the old fashioned way.  Obviously, the "players in the housing market" have decided something: Sheila's not a player, or, if she is one, she can go play with herself.

Since we're talking about a career pol and academic, however, here's an idea for Sheila to chew on. Since she obviously knows better than other market participants what's in their own best interests, her position on wholesale loan modifications MUST BE the path to safety and soundness for the financial institutions the FDIC insures. As to those market participants who are subject to the FDIC's regulatory control, which, frankly, since she's so obviously right, would include all FDIC-insured institutions, even those whose primary federal regulator might not be pushing the same agenda as Sheila, she should be forcing them to adopt wholesale loan modification programs. Since the OCC, the OTS and the Federal Reserve don't know slime-from-shinola about this issue, and state bank and thrift regulators are equally ignorant and/or ineffectual, the FDIC should use its primary and backup enforcement authority to force the issue, to make these cretins fall in line. Any rational person would have to agree that a loan-by-loan analysis is not acceptable, right, so force those participants that you can reach to do what you want them to do.

In other words, Sheila, put up or shut up. The jawboning isn't working and is making you look not only foolish, but weak, which in D.C., is the bureaucratic kiss of death.

It might be that Ms. Bair realizes that she's on the sidelines and is not attempting to do anything other than conducting a PR campaign to build up her gravitas for her next job as the head of ACORN, a professor of finance at Bryn Mawr, or the Consumer Credit Commissioner of a state of her choice. Colorado's in the process of turning from red to purple, which ought to make it an attractive (or at least tolerable) destination for someone like Sheila (plus, she'd be only an hour away from radical snowboarding venues). So no one misunderstands where Ms. Bair's coming from in this "hurry-up-and-modify" world she lives in, she "demolished" the entire idea that there are any borrowers who might not be entitled to a loan modification.

She stressed the need for consumers to contact counseling groups and their lenders to try and prevent foreclosures. But describing a recent foreclosure prevention event she attended in California, Bair said policymakers need to better address the plight of consumers.

"I think we miss the human side of how this is impacting borrowers," Bair said, criticizing efforts by some policymakers to cast troubled borrowers as investors or speculators.

  "I didn't see a lot of house flippers," Bair said of the California event.

Ms. Bair attended an event in California and did not see "a lot of house flippers" there. Which is evidence of nothing, except that Ms. Bair views the world through a glass darkly.

Is it 2009 yet? Is there a new administration in the White House yet?

What We Have Here Is A Failure To Truncate

The Wall Street Journal's Law Blog had an update last Friday about the status of class action lawsuits filed by aggrieved consumers (in other words, by class action attorneys who've "discovered" lead plaintiffs) to punish merchants who left too much information on electronically-printed credit card receipts in violation of the Fair and Accurate Credit Transactions Act (FACTA). Oddly, the Law Blog's link to FACTA ties to a Yahoo article by Chris Kelleher ("an award-winning small-business advisor and attorney") about the disposal requirements of FACTA, not the truncation requirements. Oh well, "close" is enough in horseshoes and law blogging, right?

The latest post is an update of a post earlier in April that discussed a split in lower courts, with one trial court denying class action status partly on the basis of an "annihilation defense" (class action damages would "annihilate" the defendant), and another court declining to strike down class certification on that basis. One commenter to that post points out that the "overwhelming majority" of the 300 class action lawsuits filed involve the failure to delete the expiration date of the consumer's credit card on the receipt, not all but the last five digits of the credit card number. The commenter alleges that "[t]he expiration date is of NO benefit to an identity thief..." I'm not certain that's correct, since it's one piece of information that, taken with others, can aid an identity thief. Moreover, its elimination is technically required by FACTA, and the failure to delete it exposes these defendants to between $100 and $1,000 per class plaintiff (and, of course, the always-beneficial-to-society class action attorneys' fees), so there you have it. If the plaintiffs can prove reckless or willful disregard for the law, then the upper limit of damages is a real possibility.

A commenter to the earlier post who claims to be an attorney whose firm is defending some of these suits makes the claim that the liability should be covered by the retailer's liability insurance, and, therefore, "so as long as we can keep the settlements reasonable, it won’t spell the end of the companies (just their ability to acquire reasonably-priced insurance in the future)." That's certainly a very practical take on the problem. Once again, the insurance company pays over the short run, but everybody pays over the long run through higher premiums, although this isn't an issue that's likely to be recurring, is it?

It might be because I followed FACTA so closely for some of my clients, but I'm not sympathetic to the ignorance of retailers, especially some of the large ones, who claim ignorance of the law (never a sufficient excuse in any event). In an article in last April's WSJ, an attorney for a retailers trade group blamed credit card companies for doing a lousy job of notifying retailers. I thought that was the job of retailers trade groups.  I simply don't see the equities lying in favor of the businesses in this case. With identity theft such a high profile crime, and with the  lead time provided to businesses to comply, the stick-your-head-in-the-sand approach doesn't seem to garner much sympathy, notwithstanding the fact that, once again, it's our favorite punching bag, class action plaintiffs' attorneys, trolling town for consumers with "nontruncated" credit card receipts.

At least one commenter claimed that class action litigation caused companies to change their practices, which is undoubtedly true, and which is used a justification for class actions. Ironically, a publication from September 2007 on this topic by Jones Day offers "prompt corrective action" as a tactic for defeating class action status.

At least two federal district court judges have denied class certification for these types of cases. When comparing the plaintiffs' failure to show any actual harm against the potential harm to the defendants in the tens of millions to hundreds of millions of dollars, the court determined that class actions were not the best method to adjudicate these claims...That both defendants immediately corrected their error upon filing of the complaints served as a major consideration behind these decisions...

Maybe an indication as to how much of a non-issue this hubbub might eventually turn out to be is demonstrated by the settlement outlined in the most recent Law Blog post.

In a settlement approved on Tuesday in the Western District of Pennsylvania, Kings Family Restaurant agreed to offer the plaintiff-class one of the following four options:

• a free ‘appeteaser’ and a free mini-sundae, with a retail value of up to $ 4.68; or

• a free homemade bowl of soup and a free slice of apple or pumpkin pie, with a retail value of up to $ 4.78; or

• a free cup of soup and a free ‘appeteaser,’ with a retail value of up to $ 4.38; or

• a free dinner salad and a free single scoop of Kings Premium Ice Cream, with a retail value of up to $ 4.38.

According to the opinion, defendant has further agreed to donate 500 gift certificates for kids’ soft drinks, with a retail value of $ 0.99 per drink, to First Tee, a non-profit organization which offers underprivileged children the opportunity to play golf. Defendant also agreed to pay plaintiffs attorneys fees and costs not to exceed $75,000.

The Law Blog states that only 165 class members (less than 1% of the class) obtained "coupons" (I assume the author meant the right to obtain the free "goodies" offered by the restaurant), which meant that the attorneys fees exceeded the recovery by 100 to 1. That's a relatively sweet deal for the lawyers, but not much reward for the class members, unless you're into "appeteasers."

As a parting observation, you have to love the comment by one anonymous person, presumably a lawyer: "I say 75 k is not worth my time." No wonder so many people hate lawyers.

Lending Tree A Little Late In Cutting Off Network Access?

Luke Mullins, associate editor at US News & World Report and author of the blog "The Collar," had a post Thursday about a disturbing letter that former Lending Tree mortgage customers received this week. According to Lending Tree, "several former employees may have helped a handful of mortgage lenders gain access to Lending Tree's customer information by sharing confidential passwords with the lenders." Those lenders used that information to gain access to the customers' loan request forms and to use the information from those forms to make their own loan solicitations to the customers.

The letter helpfully suggests that the customers get a free copy of their own credit report and, if they see any suspicious activity, to contact the credit bureau themselves and to consider filing a fraud alert with all of the credit bureaus. Lending Tree states that "we don't believe any identity theft or fraudulent financial activity resulted from this situation," although, of course, it can't be certain, can it? It may very well be that the former employees and miscreant lenders are willing to engage in such nefarious activities simply to solicit mortgage loans, but it's not beyond the pale to imagine that they're capable of worse.

Nowhere in the letter does Lending Tree offer to pay for any peace of mind, such as a year's worth of credit report monitoring. From a cost/benefit standpoint, that may make sense unless there's some evidence of identity theft or other fraudulent use of the information obtained. From a public relations standpoint ("reputational risk"), however, that's not exactly going the extra mile. Then again, it's not my money.

Luke quotes security expert Brian Cleary, who points out an obvious chink in Lending Tree's information security armor.

These are former employees—how can those user accounts to critical customer data still be active? Those should be shut down. So, their access to all of the information and resources should be revoked on the day of their termination.

Yep.

Cleary also emphasizes a point that I tell banks and other businesses all the time: "you can have policies, but if the policies live in a three-ring binder, and they are not put into practice as daily operating procedures—through some degree of automation—the chances of things like this occurring are pretty high." In other words, policies work only if you have procedures in place to ensure that they're enforced consistently.

In this case, the access termination procedures were deficient. I recently went through the development of a statement of work and negotiation of a services agreement with a vendor on behalf of a commercial bank client, to automate the process by which authorization (and termination of authorization) of access to the bank's network is effected. There are solutions in the marketplace to accomplish this, and their implementation decreases the chances that a human being, asleep at the switch, will fail to terminate the access of former employees. If you're going to rely primarily on human beings to implement the policies, then you'd better make sure that those human beings are themselves subject to checks and reviews to make certain that they're following the policies.

Otherwise, you might find your bank the subject of "The Collar."

A Bi-Partisan Roll Back? Don't Bet On It

Since the US Congress spends a great deal of its time making life miserable for financial institutions in this country, your ears perk up when legislators on both sides of the aisle make noises about easing the regulatory compliance burden on banks, especially when the bi-partisan effort concerns legislation that was passed relatively recently.

Members of the U.S. House Committee on Financial Services are trying to pass legislation that would stop the federal government from implementing regulations requiring financial institutions to police Internet gambling.

Committee Chairman Barney Frank, D-Mass.; ranking member Ron Paul, R-Texas; and committee members Luis V. Gutierrez, D-Ill., and Peter King, R-N.Y., sent a letter to all members of Congress seeking support. They said that representatives from the regulatory agencies have admitted there are "substantial problems" with creating regulations under the Unlawful Internet Gambling Enforcement Act of 2006 without hindering payment systems.

The UIGEA requires civil and/or criminal penalties for banks, credit card companies, and others who process Americans' payments to gambling Web sites. Supporters say it would prevent underage and compulsive gambling. Opponents argue that it violates U.S. citizens' constitutional rights and sets a dangerous precedent for Web commerce by criminalizing the transfer of funds if the end result is illegal.

Frank and Paul introduced H.R. 5767 earlier this month. The bill would stop the Department of the Treasury and the Federal Reserve System from proposing, prescribing, or implementing regulations required by UIGEA. Frank, Paul, Gutierrez, and King also asked the Treasury and Federal Reserve System to stop creating and enforcing regulations related to UIGEA.

"Given the many other priorities that are pending at your agencies ... we believe it would be imprudent for you to devote additional agency resources to this Sisyphean task," they explained in letters to the leaders of the Treasury and Federal Reserve.

Bankers and their trade groups have been moaning about this expected burden for some time. It's bad enough that the government expects banks to be cops where terrorists and organized (and disorganized) criminals are using the financial system to commit serious crimes, but expecting them to crack down on college kids playing No Limit Texas Hold 'Em over the Internet with the likes of Phil Laak and Jennifer Tilly is too much. At least, Ron Paul and Barney Frank agree that it's too much. We'll see where this goes. 

It's obvious that the US Government would like to sing its fangs into the neck of online gambling in some fashion, and it's obvious why.

PricewaterhouseCoopers predicted that regulated Internet gambling could generate between $8.7 billion and $42.8 billion in federal tax revenue during the first 10 years.

You could fund a lot of pork with such a tidy sum.

Just think how much they could raise if they decided to legalize and regulate Internet sales of weed?

Even if Congress fails to launch the "final solution" to the subprime mortgage "crisis" before the election, let's hope that they can at least continue a bi-partisan effort to gut this bad  piece of legislation before banks actually have to comply with it.

Cynicism or Stupidity? You Be The Judge

At the end of a long day, I tried to catch up with my "professional reading" (The Economist, The Wall Street Journal, a trade paper that doesn't list this blog in its roundup and, therefore, is dead to me, Sports Illustrated's Swimsuit Issue, etc.), and what did I read right out of the gate but this cynical nonsense.  I was about ready to start fisking the report when I decided to check with a few of my favorite bloggers first and, sure enough, Tanta and PJ had already taken care of business.

Paul Jackson at Housing Wire pummeled this sorry report today like Jake LaMotta pounded Sugar Ray when he was really, really cranky. As I read his piece, I couldn't get Robert De Niro in "Raging Bull" out of my mind ("I'm the boss-boss-boss-boss-boss-boss-boss-boss-boss!"). Just a sampling, then read the rest.

There isn’t an effective loss mitigation strategy I know of that can solve for fraud. Extending foreclosure timelines, or introducing more uniform standards for loss mitigation — both “solutions” proferred by the state AGs in their report — will actually serve to make fraud even more costly for everyone involved. And that’s the last thing anyone who wants to see housing recover should be rooting for.

[...]

In no small part, fixing the current mess is tied to fixing fraud; and that means fraud at all levels, from borrower to broker to lender. It’s both as simple and as complex as that.

Which means that it’s time borrowers, consumer groups and erstwhile working groups stop floating a revisionist history of the “hapless borrower” — you know, the one where greedy, mean lenders duped those innocent and pure borrowers? — as a substitute for what’s really going on in the real world.

Yeah, it's time, Paul, but what are the odds?

Although Tanta claims that she's merely "piling on," she actually dissects the report like a scalpel-wielding Hannibal Lechter looking for a liver to go with her fava beans ("When I opened the cranium, I found little grey matter but much fecal matter."). Her always spot-on dissection is, of course, greatly aided by the fact that she (as does Paul) has an unfair advantage over the report's authors: she actually understands the mortgage business. Her carefully considered conclusion coincides with my initial gut reaction.

The lesson of the "stated" disaster--stated income, stated assets, stated appraised values, oral "promises" of loan originators rather than clear written disclosures, the whole cluster of practices that removed the "barrier" of "paperwork"--is apparently still lost on the Working Group. We started this by being "efficient" about the documentation and casual about the borrower's own statements; we aren't going to get out of it that way. This report just reeks of political grandstanding. I'm sure I know at least one journalist who will love it.

"Political grandstanding"? You betcha.

I was talking today with an attorney who represents a financial institutions trade association, and is intimately involved in legislative efforts at the state level to "solve the subrime mortgage mess." I was commiserating with him over the apparently limitless supply of clueless legislators (my phrase, not his) who insist on doing precisely the wrong thing at exactly the wrong time. I know it's an election year, which means political cynicism is elevated above its normally high levels, but I told him that it's got to be especially tiring this legislative session trying to beat back wave after wave of ill-advised legislative interventions in the mortgage markets that even quarter-wits like yours truly can see will not only not address the intended problems, but will likely make the problems worse and, simultaneously, create a whole batch of new ones. He agreed wholeheartedly, and ruefully observed that we've still got a long way to go until November.

I asked him whether the legislators who were so eager to "do something" were amenable to listening to reasoned explanations as to how their legislation might be useless or much, much worse. His reply is that they don't want to listen because they simply don't care. They don't care about the facts and they don't care about the actual effect of the legislation. All they care about is being able to go back to their constituents, who understand  the mortgage market even less than they do, and tell them that they "did something." Adverse results likely will surface down the line, and a reasonably competent politician can always spin the story so that someone else is to blame.

This may be a long, hot, tiresome summer.

 

Payday Legislation Larded Up, Then Buried

A cadre of Colorado legislators set out on a jihad earlier this year to eradicate the stink of payday lending from the pristine air of the Mile High State. They vowed to drive the bottom-feeding, blood-sucking, tobacco-spitting varmints back into their burrows and make the world safe again for those lenders to folks on the margins who have a historical right to that kind of business.

People like this guy:

 

Or this guy:

Or even worse, THIS GUY:

The solid solons introduced legislation to accomplish that crackdown and had some early success. Opponents rightly noted that the law would likely put regulated payday lenders out of business.

"Where are these people going to go if these financial providers are no longer in the community?" asked Rep. David Balmer, R-Centennial.

Where they went wasn't the point. The point was that people who patronized payday lenders were too irresponsible to fend for themselves, so the legislature had to fend for them.

Rep. Terrance Carroll, D-Denver, said whether or not the payday lending industry survives is beside the point.

"This is about our moral obligation to protect the most vulnerable members of our society from predatory lending," Carroll said.

Take that, Balmer, you amoral SOB!

The bill narrowly passed the House and made it out of a key Senate committee intact and passed a first reading. The missteps of Internet payday lender Sonic Cash even gave the impetus for the legislation a little PR boost.

Then all hell broke loose.

Opponents started sticking amendments to the bill like bankers stick "Kick Me" signs to the back of Sheila Bair. Soon, the bill looked like any other piece of legislation: the inside of a sausage casing.

Crying "Foul!" (or simply crying), the bill's sponsors are rolling up their campaign and taking their hurt feelings back to their offices, where young interns are expected to suffer the severe punishment meted out to the innocent when the guilty are frustrated.

Sponsors said Tuesday that they plan to kill a bill that would have restricted the payday lending industry in Colorado, saying the bill no longer does what was originally intended.

House Bill 1310 would have capped the interest rate on a payday loan at 45 percent, cut lender fees and imposed a 30-day minimum repayment period, sponsors said.

But amendments added onto the bill would have allowed "endless loan fees" and set a seven-day repayment period, "making it even harder for borrowers to get out of the cycle of debt," sponsors said in a statement.

"We are killing this bill because as amended it no longer protects hardworking Coloradans," Senate President Peter Groff, D-Denver, one of the bill's sponsors, said in a statement. "The bill as it sits now protects industry profits that are garnered with interest rates that average more than 350 percent. That just isn't right."

"We began this effort to rein in excessive fees earned on the backs of hardworking Coloradans," said Rep. Mark Ferrandino, D-Denver, the bill's other primary sponsor, in a statement. "The amendments to the bill actually make the situation worse for Coloradans."

Imagine a bill intending to help actually making things worse for its intended beneficiaries! What is this world coming to?

Well, there's always next year.

Fannie's Fraud Action Fizzles

As Rod Stewart sang, "Some guys have all the luck." Certainly, Franklin Raines and Timothy Howard appear to be "fortunate sons."

In August 2006, the Department of Justice dropped criminal investigations against the two former Fannie Mae officials. Last week, the OFHEO announced that the two men, along with the company's former controller, Leanne Spencer, had agreed to pay some relatively minor fines and to give up some worthless stock options, in return for a full settlement of allegations that they had conspired to inflate Fannie Mae's earnings in order to pump up their compensation.

Raines is paying $24.7 million, including a $2 million penalty and the forfeiture of stock options, the Office of Federal Housing Enterprise Oversight said in a statement today. Former Chief Financial Officer Timothy Howard will surrender $6.4 million, and Leanne Spencer, who was the Washington-based company's controller, was fined $275,000.

That might sound like a lot of money to most of us, until you compare it to what OFHEO alleged was its damages when it commenced administrative proceedings against these individuals.

The settlements, short of the $215 million in damages sought by Ofheo, ends more than a year of fighting with the executives over who was responsible for $6.3 billion in misstatements at the government-chartered company. Fannie Mae insurance will pay the $3 million cash portion of the settlements.

Note that the defendants don't come out-of-pocket for the cash settlement, the insurance company does. Therefore, the defendants must be giving up something very valuable other than cash as part of the over $32 million that the defendants are "paying" or "giving up," right? Not so fast.

Raines will pay a $2 million fine to the federal government [Ed: paid for by insurance]; relinquish claims on stock options valued at $15.6 million when they were issued; donate $1.8 million in proceeds from the sale of Fannie Mae stock to charitable programs that help struggling homeowners; and forfeit about $5.3 million in other benefits that Ofheo didn't disclose.      

Raines was given stock options in 2000 through 2003 for 932,000 shares at exercise prices ranging from $69.43 to $80.95 a share. After he left, the shares never rose above $72 and now trade at less than $30, signaling any options he relinquished would be worthless.

In addition to the insurance company covering the cash, the stock options are worthless, yet constitute $15.6 million of the $24.7 million Raines is "paying" to settle the lawsuit. Another $5.3 million consists of foregone "undisclosed benefits" that Raines never received, but that he arguably has a right to claim.

Howard's $750,000 fine will be covered by insurance. He will surrender $5.2 million in stock options, donate $200,000 in proceeds from stock sales to charity and forfeit other benefits valued at $240,000, Ofheo said.

Again, less than impressive, isn't it?

The defendants' counsels claimed victory, and I don't blame them. Although shareholder litigation against these individuals is pending, today's The Wall Street Journal notes that such litigation is also likely to end in a settlement. On the other hand, the defendants have to pay their lawyers, which ought to put a dent in their wallets. Moreover, the WSJ also alleges that "the careers of Messrs. Raines and Howard were shattered." Perhaps. One thing this country's good at is giving people a second chance (assuming, unlike, say, Ken Lay or Jeff Skilling, you stay out of jail and/or don't drop dead). I wouldn't be surprised to see one or more of these individuals make a come-back.

Maybe Donald Trump will transform them.

MMMMMMM! Chocolate!

Two years ago we reported on the views of law professor Fred Cate that when it comes to privacy protection, banks cannot rely on consumers to do the right thing.

One of the other points that Cate made in his speech, if not in his articles, is that privacy legislation (such as Gramm-Leach-Bliley) and security breach notification legislation makes the assumption that decisions concerning, and control of, personal information is best left to the consumer. In one study cited by Cate, the vast majority of consumers approached on the street who were offered a discount card to Starbucks in return for revealing the user name and password to their workplace computer willingly made the exchange. Another fact cited by Cate is that the vast majority of identity theft is the result of negligent actions or omissions of consumers.

Recent reports confirm that Cate's view is sound.

A survey out today by the organizers of the tech-security conference Infosecurity Europe found that 21% of 576 London office workers stopped on the street were willing to share their computer passwords with a good looking woman holding a clipboard. People were offered a chocolate bar in exchange for the information. More than half of the people surveyed said they used the same password for everything.

As depressing as the survey may be for the security pros whose job it is to keep corporate networks safe, the results are a substantial improvement over last year. That was when 64% of people were willing to give away their passwords. But there were other disturbing signs this year: 61% of workers surveyed shared their birthdates and a similar number – 60% of men and 62% of women – shared their names and telephone numbers.

This doesn’t sound particularly damaging, but cyber criminals could use this information to craft so-called phishing emails that install malicious computer code when opened or try to convince people to cough up more damaging information like a bank account number.

It’s easy to dismiss this kind of threat as more imagined than real, but consider that this week, around 20,000 corporate executives received phishing emails that purported to be a subpoena. The emails seemed authentic because they addressed the execs by name and included their phone numbers, the Washington Post reports. By clicking on the link in the email and following the directions supposedly required to view the subpoena, the executives installed software on their computers that can steal usernames and passwords. So far, the scam has netted around 2,000 victims, according to the Post.

Stupid is as stupid does, right Forrest?

Preston Jumps From The Frying Pan Into The Fire

Steve Preston, a man credited with turning around (or failing to turn around, depending on your partisan agenda) the SBA, has been tagged to do the same for an Alphonso-less HUD.

President Bush on Friday nominated Steve Preston, now head of the Small Business Administration, to take over the Department of Housing and Urban Development.

[...]

At HUD, Preston would face a turnaround mission similar to the one he faced when he took over the SBA in July 2006, when the SBA was swamped by huge backlogs in processing disaster loan requests following Hurricane Katrina. Preston, a former corporate executive with ServiceMaster Co. and First Data Corp., revamped the SBA's disaster loan program and received mostly good marks for improving the agency's processes and employee morale.

Interestingly, while Democrat gassbag Representative Nydia Velazquez of New York griped about what a horrible job Steverino did at the SBA, full-time Senator and part-time cigar store Indian John Kerry heaped praise upon his performance, notwithstanding their "policy differences." Unfortunately for Preston, that Mexican standoff on the Democrat side of the aisle was torpedoed by an unexpected calamity: Preston received a ringing endorsement from our Decider-in-Chief.

At HUD, Bush said he "looked for a leader with an impressive background in finance," a reformer, and a "consensus-builder ... who can get things done."

"Steve Preston is an experienced manager who knows what to do," Bush said. "He knows how to tackle a problem, devise a solution and get results."

Bet Bush wishes he'd had Steve in charge of the Defense Department in 2003.

In addition to widespread public dissatisfaction with the President's job performance, you have the additional burden of the fact that Bush appointed Alphonso, then stood behind him through a widening scandal of alleged cronyism and a foot-in-the-mouth marathon by the beleaguered Jackson. That certainly makes heaping praise on Preston a double-edged sword. And as a fitting grace note to Preston's appointment ceremony, Bush lavished praise on the former HUD chief.

"I know him well, he's a decent man, a dedicated man, and he's a compassionate man," Bush said. "He's worked tirelessly at HUD to help America's homeowners."

"America is a better place because of your service," he told Jackson. "I wish you and Marcia all the best as you head back to Texas -- I'll be right behind you."

Not a moment too soon, Mr. President, although some of us are not exactly doing cartwheels at the prospects of any of your three most likely successors assuming your mantle.

UPDATE I: Paul Jackson at Housing Wire predicts smooth sailing for Preston's confirmation.