Tag: The New York Times

A Good Deal, for Whom?

Posted on February 13, 2012

After months of wrangling, the government last week announced a $26 billion settlement with five of the country’s biggest banks that is designed to offer some relief to homeowners victimized by fraudulent mortgage practices and foreclosure abuses.

The five banks include Bank of America, JPMorgan Chase, Citibank, Wells Fargo and Ally Financial.

The goal of the settlement is to hold the banks accountable for a range of shady dealings — ranging from charging new homeowners excessive fees for insurance policies to evicting current homeowners on the basis of unsubstantiated or false information — and also to jumpstart the moribund housing market.

Observers, however, are skeptical about who this settlement will really help. Some say the banks have gotten off easy even as relatively few homeowners will be helped by the promised aid. A column in Sunday’s New York Times business section, for example, suggests that the payback to people whose properties were wrongly foreclosed on will most likely be less than $2,000 per homeowner. The column also describes the settlement as a “stealth bailout of the major banks” because, as one critic points out, “it will improve the value of the second liens or home equity lines of credit [the banks] own” because these holdings are “worthless if the first mortgages preceding them are underwater.”

Nor is there any expectation that the banks will actually carry through on the promised compensation, the column goes on to say, citing other agreements with the government — such as Countrywide Financial’s predatory lending settlement in 2008 — in which banks failed to live up to the terms of a deal.

Finally, skeptics doubt that the mortgage industry’s reputation will be rebuilt after an agreement that offers too little, too late to help either individual homeowners or the overall housing market.

According to Kent Smetters, Wharton professor of business and public policy, “The agreement ostensibly deals with alleged acts committed by banks during the foreclosure process, including improper papering and fees. However, the remedies in the agreement itself use broad brush strokes that do not sufficiently target the harmed parties, instead benefitting some homeowners who simply borrowed more than they can repay. It is not surprising, therefore, that the help is diluted.”

The real problem, he adds, “is not the total size of payments, but a banking system with insufficient accounting systems and securitization processes that render targeted remedies nearly impossible.”

Wharton real estate professor Susan M. Wachter describes the deal as “a start, a down payment, if you will. It covers only a small share of the market. But for those it helps, it will matter. And it may help put into place a template for solving the far larger part of the problem that is out there.”

Indeed, an article last week in The New York Times notes that the money “will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosures,” but adds that the agreement remains “the broadest effort yet to help borrowers owing more than their houses are worth.” It predicts that about one million people will be able to get their mortgage debt “reduced by lenders or will be able to refinance their homes at lower rates.”

In addition, the article states, the settlement does not preclude regulators from filing criminal charges against banks or investigating other questionable practices related to the housing market, such as insurance and tax fraud or the bundling of risky mortgages into securities later sold to unsuspecting investors.

 

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Is Your Password “123456″?

Posted on January 23, 2012

Zappos, which reported a hack attack last week, is just the latest company to notify its customers that their names, email addresses and billing information had been compromised. The online shoe and clothing company isn’t alone. Hack attacks have recently hit government agencies, news sites and retailers ranging from the U.S. Justice Department and Gawker to Sony and Lockheed Martin, as hackers become more sophisticated in their ability to steal customers’ identities and personal information.

“It’s a human problem,” says Barry Wilson, head of Wharton’s technology security team, referring to consumers’ continual failure to follow oft-repeated password safety advice. Indeed, the most common passwords continue to be “password,” “123456” and “12345678” – all of them easy marks for hackers.

One of the reasons behind consumers’ continued laxness “is that IT people have made it difficult” to be vigilant, says Wilson. “If you go to a bank, it will have one set of password specifications. If you go to Amazon, it has another set. And some of [the requirements] are pretty bad. A number of financial companies require a short password,” but in order to comply, consumers are shoehorned into “choosing a password that is hard to remember.”

Security experts have long recommended that consumers divide their accounts into critical ones versus non-critical ones. Under this scenario, a bank password would be long and complex while passwords for a newspaper subscription, retailer or blogger site would be simpler. Wilson, however, recommends that consumers “have a unique password that is as complex as it can be for every website. Setting individual passwords is far and away the best thing you can do. Losing a password in one place is never as bad as losing it everywhere.”

As the Zappos incident shows, password and identity theft is rampant. Just a few recent examples: Valve, an online service that sells games and other software, found that its database was hacked in November, compromising credit card information and passwords. Sony’s PlayStation network was compromised twice in a six-month period. RSA, a high–level security vendor, was hacked in March and had to replace all 40 million SecurID tokens, including those used by defense contractor Lockheed Martin. Tokens are a device normally used in addition to a password; they display a number that changes every 30 seconds, says Wilson.

According to Symantec, the largest manufacturer of security software for computers (including Norton antivirus), web attacks increased 93% in 2010 compared to 2009, and the average number of identities exposed in each of the hacking incidents was 260,000. In addition, the range of prices “seen advertised in the underground economy for each ‘stolen’ credit card number” was between $0.07 and $100.

With all these and other hack attacks, is it likely that consumer confidence in online security will be shaken? Wilson doesn’t think so. “There is a tendency for people to believe it won’t happen to them,” he says. Nor does he think that such incidents will discourage online shopping. “That ship has sailed. I can’t go back to Borders. I buy books from Amazon.”

At the same time,  consumers should be aware that “companies often don’t do a good job with your password,” Wilson adds. For example, many organizations “are not storing them correctly. Passwords have to be encrypted [scrambled in such a way that they are very difficult or impossible to track] when they are stored. If you, as a user, go to an ‘I’ve forgotten my password link’ and the site mails it to you, they aren’t storing it safely. When that password gets hacked, all the passwords will be immediately known.”

But Wilson does predict that companies’ consistent failure to deal with password safety means that many will “go out of business because [repeated hack attacks] do affect people’s confidence. One of the things that hurt Sony so much was that they covered their heads for a while and tried to pretend [the compromise] wasn’t bad. As shown time and time again, you have to get in front of the problem” and describe to consumers your plan for dealing with it. Zappos is an example of a company that responded quickly and effectively to the hack, Wilson says.

Since most people can’t remember their cell phone number, let alone a series of complex passwords for individual accounts, Wilson suggests using a password manager – software that integrates with the web browser and helps users organize their passwords and PIN codes. “The best ones cost money,” he notes, adding that he uses 1Password, which charges $69.99 for a “Mac + Windows bundle” single user license. He has also used Password Safe, which is free and exists on every platform, “but is not as well-integrated and not quite as graphically well done.”

Scott McNulty, senior IT project leader at Wharton and a member of the security team, advises consumers in a recent blog post not to use words based on personal information (such as your birthday or your pet’s name) or words found in the dictionary. The longer the password the better, he writes, but most of all, don’t use the same password for all your accounts. He cites hackers’ recent success gaining access to all the emails and passwords of registered Gawker network commentators, partly because the encryption system was outdated. McNulty also reviews various password managers, including 1Password, Password Safe and LastPass. Ironically, according to Wilson, LastPass recently suffered its own hack attack, although he doubts the company will suffer much damage because it appears to have caught the potential breach quickly “and responded promptly and openly.”

If consumers weren’t aware of the rise of hackers, two articles in the press today should help remind them. A front page story in The Wall Street Journal titled, “Hackers-for-Hire Are Easy to Find” points out “just how simple and affordable online espionage has become” and notes that one site “advertises online services including being able to ‘crack’ passwords for major email services in less than 48 hours.” A front page story in The New York Times business section titled “Cameras May Open Up the Board Room to Hackers” describes the ease with which hackers can access sensitive information in videoconference rooms. As the article notes: “Businesses spend billions each year beefing up security, but they rarely consider the vulnerability of their videoconferencing equipment.”

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No Help for the Unemployed

Posted on August 5, 2011

According to a recent article in The New York Times, unemployed people looking to get back into the workforce may find that companies are much more interested in candidates who already hold jobs. It’s not an “Unemployed Need Not Apply” situation, but nor is it a welcome mat for those hardest hit by the sputtering economy.

“Given that the average duration of unemployment is nine months — a record high — limiting a search to the ‘recently employed’,’ much less the currently employed, disqualifies millions,” noted the Times, which reviewed recent online job vacancy postings as part of its research.

For many unemployed, it is a vicious cycle: They can’t get hired because they may have fallen slightly behind on their job skills, but they can’t get up to speed on these skills unless they land a job. A recent Knowledge@Wharton article acknowledged the dilemma: “As a growing number of workers languish on the unemployment rolls for months or years, the danger is that they will become permanently jobless because they lack the skills to get hired once the jobs return.”

In addition, experts interviewed by the Times doubted whether such bias on the part of employers is considered discriminatory, although New Jersey passed a law “outlawing job ads that bar unemployed workers from applying,” and similar action is being considered by other states as well as the U.S. Congress.

Job figures released today by the U.S. Labor Department showed employers added 117,000 new jobs during the month of July, enough to bring the unemployment rate down from 9.2% to 9.1%, but not enough to signal a major shift in the economy.

Knowledge/Today asked Wharton management professor Matthew Bidwell for his thoughts on the unemployment situation.

Knowledge/Today: Do you feel there is some justification for an employer’s decision to favor the employed? Is it a form of discrimination or just a smart business decision?

Bidwell: Both. It is a form of discrimination, but one that makes some sense. There are lots of reasons that people end up unemployed, including their position being eliminated, their department being closed down or their whole company going bankrupt. When companies choose to downsize some of their workers though, they will usually seek to retain their higher performers (of course, how they define their higher performers can also be a highly political process). Nonetheless, potential employers are aware that the people who are let go first may be those who were not performing well in their prior job. Moreover, the fact that they could not instantly find a job suggests that they did not have a strong enough reputation [to be quickly] snapped up by another employer.

I should emphasize that being unemployed is a very noisy signal of quality. There are many reasons why workers might be unemployed despite being stellar performers. But most of the signals that employers rely on in hiring are pretty noisy, since they don’t have direct experience with the worker. It therefore makes sense for the employer to be discriminating against the unemployed, even though many of the unemployed would make excellent hires.

Knowledge/Today: Are employers actually the ones who may lose out in the long run because they are bypassing people in the workforce who might be willing to work longer hours for less pay?

Bidwell: That’s possible. Given the state of the job market though, employers already have a huge amount of bargaining power and are able to fill jobs easily. So the sad truth is that employers probably aren’t missing out all that much.

Knowledge/Today: How would you advise an unemployed person to present themselves in this job market, knowing there might be reluctance on the part of employers to hire them?

Bidwell: A lot of people try to mask their unemployment in various ways. Among executives, a lot of people will set up as independent consultants. Regardless of how much business they get, it allows them to appear employed while they search for work. Returning to school is another strategy, although obviously that is expensive.

Knowledge/Today: Is there a “solution” to this dilemma for those seeking jobs, or is it one of many intractable problems facing our workforce today?

Bidwell: A better job market. Some people describe applying for jobs as a process of queueing, where the most attractive applicants go to the front of the queue and the least attractive go to the back. As people spend time in unemployment, they get shuffled towards the back of the queue. The problem at the moment is that employers only need to look near the front of the queue to meet their demands. Until hiring picks up and employers are forced to consider a wider range of people for their jobs, I think it will continue to be hard for unemployed workers.

 

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Marketing Keds to a New Generation of Feet

Posted on February 24, 2011

If you were a kid anytime in the past century, you probably owned a pair of Keds. The ubiquitous canvas sneakers are undergoing their latest makeover in an effort to build buzz among a different constituency — 20-somethings.

To do that, a 32-foot trailer designed to look like a shoebox is hitting the road for stops at U.S. college campuses. The “How Do You Do?” campaign invites students to design their own shoes at a touch-screen kiosk and purchase them. Each stop will feature shoes inspired by that city — for example, the March stops in Austin, Texas feature shoes in denim, chambray and twill with Western details.

“As people go through identity crises, so do the brands,” Kristin Kohler Burrows, president of Keds Group told The New York Times. She said one of the goals of the campaign is to “awaken people to the fact that [Keds] is an iconic brand.”

Keds were first introduced in 1916. By 1930, the company had unveiled a line of high-heeled shoes — dubbed “Kedettes” — in an effort to appeal to women. The shoes have adorned the feet of Marilyn Monroe, Jackie Kennedy and Katherine Hepburn.

And this wouldn’t be the first time that Keds have been a trend among young people. In the 1980s and 1990s, they had a place in the closets of many teenage girls, alongside babydoll dresses, slouch socks and lace-trimmed bike shorts. Keds also tried to attract a similar audience in the mid-2000s, when actress Mischa Barton — then starring on young adult-centric mega-hit The O.C. — became the shoes’ spokesperson.

Now the company is trying to appeal to the millennial demographic by featuring artists and young people giving back to their communities in its ads. Keds is also running a design contest, and adopting a campaign Twitter hashtag. “We really feel that what’s important to this consumer is to engage with a brand” and experience it firsthand, Kohler told the Times.

Maintaining the “cool” factor of any product is a tricky proposition. In a past Knowledge@Wharton story, marketing professor Jonah Berger noted that fashion is fertile ground for fads because clothing is a way to communicate something about a person’s identity and style. “Styles often start with one group, and then another group starts to use it because they want to look like that first group,” Berger said. But when that second segment adopts the trend, “the meaning may be lost.”

He and other faculty said it is critical for brands to understand the potential value of a product before pouring money into keeping it current. The Times story reported that Keds spent $1.68 million on advertising from January to September of last year, compared to $450,000 during that same time in 2009. “You should only invest in things where you can do a credible job of forecasting that the perceived value of your offering compared to your competition will be sustainable,” Wharton marketing professor Leonard Lodish told K@W. “You need to understand the factors that will make that happen.”

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