Making Easy Money

Even after last year's service cuts and a 17 percent fare increase on 30-day MetroCards, the nation's largest mass transit system is still imperiled by chronic budget problems. A $500 million deficit is project for next year and in four years deficits will grow to $1.5 billion.

It's every-day New Yorkers that usually bear the burden of these budget gaps. Naturally, voters want to know: which candidate for governor will finally bring the MTA's finances under control?

Unfortunately, all they've heard from the Democratic and Republican candidates is outdated rhetoric. Cuomo has said he would roll back the mobility tax, a source of $1.5 billion in annual transit revenue, while Paladino has pledged to "take apart" the transit authority "piece by piece." But does anyone have a plan to put the MTA back together again?

Both Cuomo and Paladino have made reform of Albany the central message of their campaigns. When it comes to transit, Albany certainly needs reform, but it shouldn't come via baseball bat. And threatening to end the mobility tax tells voters that racking up political points matters more than making the tough choices necessary to save mass transit.

The last thing New York needs is a continuation of the policies that have led to the MTA's grim situation: starving the transit system of vital revenue and then blaming MTA executives and MTA employees for service cuts. The fact is, the governor and state legislature are most responsible for the MTA's finances.

Recently the state legislature has gone so far as to take $160 million in dedicated revenue from transit, a decision that led to last year's service cuts. For the sake of New York's economy, and for the 2.3 million New Yorkers that rely on mass transit every day to get to work, Albany's neglect of mass transit must end.

Real reform means making smart investments in the transit system that will drive economic growth, create good jobs, boost the state's competitiveness, and save taxpayers money in the long-term. Albany's mismanagement of MTA finances has saddled the authority with a $31 billion debt burden. This excessive borrowing comes at a cost. This year the MTA will pay $1.8 billion just for past borrowing, and this figure will grow to $2.7 billion a year by 2017.

Earlier this month, the Drum Major Institute for Public Policy and Transportation Alternatives released a five-step plan to help the next governor put the MTA on sound financial footing. One recommended step in the plan is fully embracing congestion pricing or bridge tolls to fund mass transit. After all, drivers greatly benefit from the congestion reduction that transit provides. Without transit, there would be 8.5 million more car trips on the region's roads every day.

Another recommended step for the next governor is to partner with New York's congressional delegation to secure more federal funding for transit. Transit is a top priority for the Obama administration and an important new transportation bill will be introduced next year. After vigorous campaigning by Mayor Antonio Villaraigosa, Los Angeles will receive a $540 million federal loan for transit. The next governor of New York should make a case in Washington for more federal funds for state transit projects. After all, the New York City metro region produces $1.2 trillion in economic activity every year. But there is no indication yet that the candidates would expend as much energy on transit as other national leaders.

Instead, there is a knee-jerk fixation on cost-cutting to solve the MTA's budget mess. It won't work. MTA chief Jay Walder has already found $700 million in annual savings through cost-cutting and other efficiencies and has plans to find more. But no amount of cost cutting will fill the $9 billion hole in the MTA's capital budget, or pay down the $31 billion in debt.

There will be no easy answers. But one thing is clear: The state's greatest revenue generator, New York City, depends on transit. And communities upstate will look for new transit options as gasoline gets more expensive. Other cities across the globe are ambitiously building transit systems with the intent of supplanting New York's dominance. The next governor cannot create a competitive twenty-first century transit system via cuts and quick fixes. Reinvestment is crucial.

John Petro is an urban policy analyst at the Drum Major Institute for Public Policy. Noah Budnick is deputy director at Transportation Alternatives.

Liar, Liar, Sheep on Fire

Glenn Fleishman at 9:00 AM Wednesday, Oct 27, 2010 

Glenn Fleishman is a Seattle journalist who started one of the first Web-hosting companies in 1994, worked for Amazon in 96-97, and then decided he wanted a life. He writes for The Seattle Times, The Economist, and TidBITS, among other publications.

Photo: Prasad Kholkute

Firesheep should freak you out, at least for a moment. It's a Firefox extension that lets any normal human being--I'm not talking about you, BoingBoing readers--install the add-on and then steal the active sessions of people using unencrypted browsing sessions with popular online services on the same Wi-Fi network. This involves no Wi-Fi foolery, because the necessary network traffic is openly available.

Walk into any busy coffeeshop, fire up the 'sheep, and a list of potential identities to assume at any of two dozen popular sites appears. Double-click, and you snarf their identifying token, and log in to the site in question as that person.

Firesheep is a business-model tour de force, not a zero-day technical one. It's a proof of concept that repackages and expands on earlier security research to expose a failure in the risk profile adopted by Web sites on behalf of their unsuspecting users. There's no money to be made by a Web site in fixing this problem for its customers or readers. Thus, only a security-conscious CIO might be able to push through the budget item necessary to bump the back-end systems up to the level needed.

Firesheep is a public relations exploit, too; it's so easy to use and to demonstrate that it shot round the world. Previous demonstrations spread the word in the tech community, and a little beyond. Firesheep is telegenic.

The add-on is the latest effort to lay bare a well-known problem in how major (and minor) Web sites identify users after login. Even if you log in using a secure SSL/TLS connection, a reliable method of end-to-end encryption, many sites still hand you back to plain old HTTP. In the process, sites brand you with a token that stands in for the login process you completed. This is a separate issue from involuntary ad tracking or the undeletable evercookie. (BoingBoing is a practitioner of tokens for both commenting and the Submitterator, which arguably means that someone could post nonsense under your name from a coffeeshop, but don't do that already?)

Because the open Web is stateless, a sequence of pages viewed by the same browser might as well be pages viewed by entirely different browsers. A login token placed in a cookie glues a binding on the edge of those pages, creating a session. The token doesn't let a third party sniff your user name or password, but it does let a browser lay claim to your identity for a set period of time. (HTTP does have a stateful account-based authentication system, but it has weak cryptographic elements, and browsers have unchangeable interface elements for handling failed logins, lost passwords, or add-ons, like a CAPTCHA.)

The developer of Firesheep, Eric Butler, traces the understanding back to 2004, but 2007 is when knowledge went over the top. Robert Graham of Errata Security coined the term in 2007 in a Black Hat presentation. He created a proof-of-concept not much different in intent or function than Firesheep, but without the click-to-install simplicity, the long list of sites to snarf, and browser integration.

Of the large firms with this flaw, I'd argue that Google took this most seriously. In the intervening three years, Google has been layering SSL/TLS on ever more of its services. Gmail even added an option to kill other sessions. (Scroll to the bottom of the Gmail screen, and click Details at the end of the "last account activity" line to view the option.)

Many other sites have let the problem remain, though, beefing up security through the sop of offering secure logins, as noted above. It's quite rare to find any major site allowing an unencrypted login, which is a big improvement over a few years ago. Firesheep comes with 26 prefabricated sidejacking tools for sites like Facebook, Amazon, and bit.ly. Amazon and other sites that have a mix of plain HTTP and SSL/TLS-protected pages require re-authentication and SSL/TLS when you move into making a purchase, canceling an order, or other account-based activities. But you can place a 1-Click order without logging in again.

Less-visited sites in the millions have this sheepish problem, and some use identical software (and thus token names in the browser) making a mass-exploit via a Firesheep update the work of minutes. But it's far less likely a random coffeeshop ne'er-do-well would sidejack such a session, or get anything out of it.

The remaining question is, of course, what can you do to prevent your credentials from making you go baaaaaaaaaa? Lots.

* Firefox users should install HTTPS Everywhere, a joint effort of The Tor Project and the Electronic Frontier Foundation. This forces SSL/TLS connections for sites that offer, but don't require, continuous secured browsing, including content sites like the New York Times and Wikipedia. You can use the Tools > Add-Ons option to disable specific sites if you have trouble.

* Engage in no unsecured Web logins when working on an untrusted network, public or otherwise. This is my primary approach after HTTPS Everywhere. It's easier than it sounds. If I can't use SSL/TLS through a session, I don't do it unless I use a VPN (see below).

* Secure all the services you use. Most email hosts offers SSL/TLS protected POP, IMAP, and SMTP sessions. FTP is absolutely in the clear; use SFTP (an SSH-based variant) or FTPS (FTP with SSL/TLS encryption). Check the box for SSL/TLS anywhere it's available. Twitter's API for third-party clients defaults to unprotected transactions; Echofon, at least, has a "use SSL" box I check.

* Use a VPN. A virtual private network connection creates an encrypted tunnel for all your data between your computer or mobile and a server somewhere else on the Internet. That's typically more than enough to protect you from sniffing on the local link. I've used WiTopia for years, which is a fee-based service offering PPTP and SSL VPN connections. AnchorFree offers Hotspot Shield at no cost.

* Instead of a VPN, set up an SSL/TLS Web proxy through which all your browsing is rerouted. That also protects the local link, and can be easier if you have a server elsewhere that you can set this up, or use a paid service.

Eric Butler has complementary advice in a post on his site about the day after releasing Firesheep that he wrote with co-presenter Ian Gallgher. Read that for more on what does not work, too.

Firesheep is named after the famous Wall of Sheep at Defcon, which displays selected details of unencrypted logins and other sessions over the event's Wi-Fi network from people who, by attending Defcon, should know better than to ever send anything unencrypted over a public Wi-Fi network. If Firesheep succeeds, the whole world becomes a Wall of Shame, with the shame reflecting on the sites that haven't updated their costs and systems to reflect the current reality of basic security when their users surf in public.

Glenn Fleishman contributes continuously to the Economist's Babbage blog, and is a senior editor at the Mac journal TidBITS.

Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>

Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...

BREAKING <b>NEWS</b>: James Cameron&#39;s Next Films Are &#39;Avatar 2′ &amp; &#39;3′ For <b>...</b>

BREAKING NEWS: James Cameron's Next Films Are 'Avatar 2' & '3' BREAKING NEWS: James Cameron's Next Films … TV Pitch Season Coming To An End � Official: 'The Hobbit' Stays In New Zealand � Michael Jackson Song 'Thriller' In Center Of Pic ...

ABC <b>News</b> for iPad adds 2010 Election Results | iLounge <b>News</b>

iLounge news discussing the ABC News for iPad adds 2010 Election Results. Find more iPad news from leading independent iPod, iPhone, and iPad site.

apartment property management companies

Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>

Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...

BREAKING <b>NEWS</b>: James Cameron&#39;s Next Films Are &#39;Avatar 2′ &amp; &#39;3′ For <b>...</b>

BREAKING NEWS: James Cameron's Next Films Are 'Avatar 2' & '3' BREAKING NEWS: James Cameron's Next Films … TV Pitch Season Coming To An End � Official: 'The Hobbit' Stays In New Zealand � Michael Jackson Song 'Thriller' In Center Of Pic ...

ABC <b>News</b> for iPad adds 2010 Election Results | iLounge <b>News</b>

iLounge news discussing the ABC News for iPad adds 2010 Election Results. Find more iPad news from leading independent iPod, iPhone, and iPad site.

Even after last year's service cuts and a 17 percent fare increase on 30-day MetroCards, the nation's largest mass transit system is still imperiled by chronic budget problems. A $500 million deficit is project for next year and in four years deficits will grow to $1.5 billion.

It's every-day New Yorkers that usually bear the burden of these budget gaps. Naturally, voters want to know: which candidate for governor will finally bring the MTA's finances under control?

Unfortunately, all they've heard from the Democratic and Republican candidates is outdated rhetoric. Cuomo has said he would roll back the mobility tax, a source of $1.5 billion in annual transit revenue, while Paladino has pledged to "take apart" the transit authority "piece by piece." But does anyone have a plan to put the MTA back together again?

Both Cuomo and Paladino have made reform of Albany the central message of their campaigns. When it comes to transit, Albany certainly needs reform, but it shouldn't come via baseball bat. And threatening to end the mobility tax tells voters that racking up political points matters more than making the tough choices necessary to save mass transit.

The last thing New York needs is a continuation of the policies that have led to the MTA's grim situation: starving the transit system of vital revenue and then blaming MTA executives and MTA employees for service cuts. The fact is, the governor and state legislature are most responsible for the MTA's finances.

Recently the state legislature has gone so far as to take $160 million in dedicated revenue from transit, a decision that led to last year's service cuts. For the sake of New York's economy, and for the 2.3 million New Yorkers that rely on mass transit every day to get to work, Albany's neglect of mass transit must end.

Real reform means making smart investments in the transit system that will drive economic growth, create good jobs, boost the state's competitiveness, and save taxpayers money in the long-term. Albany's mismanagement of MTA finances has saddled the authority with a $31 billion debt burden. This excessive borrowing comes at a cost. This year the MTA will pay $1.8 billion just for past borrowing, and this figure will grow to $2.7 billion a year by 2017.

Earlier this month, the Drum Major Institute for Public Policy and Transportation Alternatives released a five-step plan to help the next governor put the MTA on sound financial footing. One recommended step in the plan is fully embracing congestion pricing or bridge tolls to fund mass transit. After all, drivers greatly benefit from the congestion reduction that transit provides. Without transit, there would be 8.5 million more car trips on the region's roads every day.

Another recommended step for the next governor is to partner with New York's congressional delegation to secure more federal funding for transit. Transit is a top priority for the Obama administration and an important new transportation bill will be introduced next year. After vigorous campaigning by Mayor Antonio Villaraigosa, Los Angeles will receive a $540 million federal loan for transit. The next governor of New York should make a case in Washington for more federal funds for state transit projects. After all, the New York City metro region produces $1.2 trillion in economic activity every year. But there is no indication yet that the candidates would expend as much energy on transit as other national leaders.

Instead, there is a knee-jerk fixation on cost-cutting to solve the MTA's budget mess. It won't work. MTA chief Jay Walder has already found $700 million in annual savings through cost-cutting and other efficiencies and has plans to find more. But no amount of cost cutting will fill the $9 billion hole in the MTA's capital budget, or pay down the $31 billion in debt.

There will be no easy answers. But one thing is clear: The state's greatest revenue generator, New York City, depends on transit. And communities upstate will look for new transit options as gasoline gets more expensive. Other cities across the globe are ambitiously building transit systems with the intent of supplanting New York's dominance. The next governor cannot create a competitive twenty-first century transit system via cuts and quick fixes. Reinvestment is crucial.

John Petro is an urban policy analyst at the Drum Major Institute for Public Policy. Noah Budnick is deputy director at Transportation Alternatives.

Liar, Liar, Sheep on Fire

Glenn Fleishman at 9:00 AM Wednesday, Oct 27, 2010 

Glenn Fleishman is a Seattle journalist who started one of the first Web-hosting companies in 1994, worked for Amazon in 96-97, and then decided he wanted a life. He writes for The Seattle Times, The Economist, and TidBITS, among other publications.

Photo: Prasad Kholkute

Firesheep should freak you out, at least for a moment. It's a Firefox extension that lets any normal human being--I'm not talking about you, BoingBoing readers--install the add-on and then steal the active sessions of people using unencrypted browsing sessions with popular online services on the same Wi-Fi network. This involves no Wi-Fi foolery, because the necessary network traffic is openly available.

Walk into any busy coffeeshop, fire up the 'sheep, and a list of potential identities to assume at any of two dozen popular sites appears. Double-click, and you snarf their identifying token, and log in to the site in question as that person.

Firesheep is a business-model tour de force, not a zero-day technical one. It's a proof of concept that repackages and expands on earlier security research to expose a failure in the risk profile adopted by Web sites on behalf of their unsuspecting users. There's no money to be made by a Web site in fixing this problem for its customers or readers. Thus, only a security-conscious CIO might be able to push through the budget item necessary to bump the back-end systems up to the level needed.

Firesheep is a public relations exploit, too; it's so easy to use and to demonstrate that it shot round the world. Previous demonstrations spread the word in the tech community, and a little beyond. Firesheep is telegenic.

The add-on is the latest effort to lay bare a well-known problem in how major (and minor) Web sites identify users after login. Even if you log in using a secure SSL/TLS connection, a reliable method of end-to-end encryption, many sites still hand you back to plain old HTTP. In the process, sites brand you with a token that stands in for the login process you completed. This is a separate issue from involuntary ad tracking or the undeletable evercookie. (BoingBoing is a practitioner of tokens for both commenting and the Submitterator, which arguably means that someone could post nonsense under your name from a coffeeshop, but don't do that already?)

Because the open Web is stateless, a sequence of pages viewed by the same browser might as well be pages viewed by entirely different browsers. A login token placed in a cookie glues a binding on the edge of those pages, creating a session. The token doesn't let a third party sniff your user name or password, but it does let a browser lay claim to your identity for a set period of time. (HTTP does have a stateful account-based authentication system, but it has weak cryptographic elements, and browsers have unchangeable interface elements for handling failed logins, lost passwords, or add-ons, like a CAPTCHA.)

The developer of Firesheep, Eric Butler, traces the understanding back to 2004, but 2007 is when knowledge went over the top. Robert Graham of Errata Security coined the term in 2007 in a Black Hat presentation. He created a proof-of-concept not much different in intent or function than Firesheep, but without the click-to-install simplicity, the long list of sites to snarf, and browser integration.

Of the large firms with this flaw, I'd argue that Google took this most seriously. In the intervening three years, Google has been layering SSL/TLS on ever more of its services. Gmail even added an option to kill other sessions. (Scroll to the bottom of the Gmail screen, and click Details at the end of the "last account activity" line to view the option.)

Many other sites have let the problem remain, though, beefing up security through the sop of offering secure logins, as noted above. It's quite rare to find any major site allowing an unencrypted login, which is a big improvement over a few years ago. Firesheep comes with 26 prefabricated sidejacking tools for sites like Facebook, Amazon, and bit.ly. Amazon and other sites that have a mix of plain HTTP and SSL/TLS-protected pages require re-authentication and SSL/TLS when you move into making a purchase, canceling an order, or other account-based activities. But you can place a 1-Click order without logging in again.

Less-visited sites in the millions have this sheepish problem, and some use identical software (and thus token names in the browser) making a mass-exploit via a Firesheep update the work of minutes. But it's far less likely a random coffeeshop ne'er-do-well would sidejack such a session, or get anything out of it.

The remaining question is, of course, what can you do to prevent your credentials from making you go baaaaaaaaaa? Lots.

* Firefox users should install HTTPS Everywhere, a joint effort of The Tor Project and the Electronic Frontier Foundation. This forces SSL/TLS connections for sites that offer, but don't require, continuous secured browsing, including content sites like the New York Times and Wikipedia. You can use the Tools > Add-Ons option to disable specific sites if you have trouble.

* Engage in no unsecured Web logins when working on an untrusted network, public or otherwise. This is my primary approach after HTTPS Everywhere. It's easier than it sounds. If I can't use SSL/TLS through a session, I don't do it unless I use a VPN (see below).

* Secure all the services you use. Most email hosts offers SSL/TLS protected POP, IMAP, and SMTP sessions. FTP is absolutely in the clear; use SFTP (an SSH-based variant) or FTPS (FTP with SSL/TLS encryption). Check the box for SSL/TLS anywhere it's available. Twitter's API for third-party clients defaults to unprotected transactions; Echofon, at least, has a "use SSL" box I check.

* Use a VPN. A virtual private network connection creates an encrypted tunnel for all your data between your computer or mobile and a server somewhere else on the Internet. That's typically more than enough to protect you from sniffing on the local link. I've used WiTopia for years, which is a fee-based service offering PPTP and SSL VPN connections. AnchorFree offers Hotspot Shield at no cost.

* Instead of a VPN, set up an SSL/TLS Web proxy through which all your browsing is rerouted. That also protects the local link, and can be easier if you have a server elsewhere that you can set this up, or use a paid service.

Eric Butler has complementary advice in a post on his site about the day after releasing Firesheep that he wrote with co-presenter Ian Gallgher. Read that for more on what does not work, too.

Firesheep is named after the famous Wall of Sheep at Defcon, which displays selected details of unencrypted logins and other sessions over the event's Wi-Fi network from people who, by attending Defcon, should know better than to ever send anything unencrypted over a public Wi-Fi network. If Firesheep succeeds, the whole world becomes a Wall of Shame, with the shame reflecting on the sites that haven't updated their costs and systems to reflect the current reality of basic security when their users surf in public.

Glenn Fleishman contributes continuously to the Economist's Babbage blog, and is a senior editor at the Mac journal TidBITS.

Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>

Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...

BREAKING <b>NEWS</b>: James Cameron&#39;s Next Films Are &#39;Avatar 2′ &amp; &#39;3′ For <b>...</b>

BREAKING NEWS: James Cameron's Next Films Are 'Avatar 2' & '3' BREAKING NEWS: James Cameron's Next Films … TV Pitch Season Coming To An End � Official: 'The Hobbit' Stays In New Zealand � Michael Jackson Song 'Thriller' In Center Of Pic ...

ABC <b>News</b> for iPad adds 2010 Election Results | iLounge <b>News</b>

iLounge news discussing the ABC News for iPad adds 2010 Election Results. Find more iPad news from leading independent iPod, iPhone, and iPad site.

Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>

Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...

BREAKING <b>NEWS</b>: James Cameron&#39;s Next Films Are &#39;Avatar 2′ &amp; &#39;3′ For <b>...</b>

BREAKING NEWS: James Cameron's Next Films Are 'Avatar 2' & '3' BREAKING NEWS: James Cameron's Next Films … TV Pitch Season Coming To An End � Official: 'The Hobbit' Stays In New Zealand � Michael Jackson Song 'Thriller' In Center Of Pic ...

ABC <b>News</b> for iPad adds 2010 Election Results | iLounge <b>News</b>

iLounge news discussing the ABC News for iPad adds 2010 Election Results. Find more iPad news from leading independent iPod, iPhone, and iPad site.

Business Making Money

The Social Media Marketing Series is supported by Webtrends Apps, which lets you quickly create and publish Facebook, iPhone, iPad, and Android apps. Learn more about it here or keep up with all Webtrends Social products by following their blog.

Sadly there’s no magic rubric for deciding whether an in-house social media workforce, a social media consultant, or an agency will best be able to meet your particular business needs. Like almost every business decision, it depends on your business’s goals, budget and particular situation.

There are, however, definite pros and cons to each approach. We’ve highlighted some of the most important factors to consider for each style of social media team.

If your business has gone through the process of deciding which type of social media team to instate, let us know about the factors you considered and how you came to your final decision in the comments below.

In-House Team

Handling all social media efforts in-house is often the most affordable route for small business owners. Per hour, an agency’s time or a consultant’s time is going to be much more expensive than a full or part-time employee.

But it’s a big job. Jamie Turner, the coauthor of How To Make Money with Social Media recommends that businesses contribute no less than 25% of one full-time employee’s time to social media efforts. There are, however, benefits to making this time investment.

“People inside can move quicker and always have their finger on the pulse of the company, which makes it easier for them to respond [on social media],” Turner says.

Outsourcing your social media presence to an agency, in addition to costing more, can be slow on a day-to-day basis. An agency that is handling a Twitterclass="blippr-nobr">Twitter account might need to correspond with the company before it’s able to answer a question. Or it might need to ask for approval when unsure if an idea is in sync with the company’s overall business strategy.

Social Media Consultant

There isn’t really a narrow definition of “social media consultant.” Some have niche specialties and can help a company’s in-house team accomplish a specific social media task. Some help companies put an overall strategy in place and then leave the execution up to the company. And others are more like off-site community managers who execute the social media tasks for the company for an undetermined amount of time.

One advantage most consultants have over agencies is that they’re less expensive. “Typically you can pay [a consultant up to] $300 to $500 an hour,” says Jason Keath, the founder of social media education business Social Fresh. “If you put that same person inside of an agency, you’re adding a lot of overhead; you’re adding the corporate structure on top of it that has to be paid for as well.” Also on the cost front, consultants often require smaller time commitments than agencies.

Companies that are looking to fill in a specific aspect of their strategy often find hiring a consultant to be the best approach because they can seek a specific person that fits the niche they need help with. “If you have an in-house team, there may be a lot of knowledge there — and let’s say it’s digital PR knowledge,” says Keath, who has been consulting for the past two-and-a-half years. “But let’s say this team has never done blogger outreach before. Obviously bringing in somebody who has done blogger outreach is really going to speed up the process.”

Companies that plan to start their own in-house teams also may benefit from a consultant approach. Social media consultant Mirna Bard sees herself as an educator.

“Although an agency has results in mind, they are typically not the educators and they sometimes only look at the marketing aspect of social media,” she says. “They may also take a tactical instead of a strategic approach. Many times agencies or in-house teams are used mostly for development and execution; they are not meant to be business advisers who make overall business decisions.”

A consultant can help develop a social media strategy in line with your business objectives and play a role in teaching your in-house team how to execute it.

Agency

Most large PR agencies and many advertising agencies now have branches for handling a business’s entire social media presence. This kind of work differs from that of most consultants in that the agencies handle both strategy and execution. Jim Tobin, the president of Ignite Social Media, counts this among an agency’s advantages.

“Since we also execute for our clients, we have a good understanding of what’s realistic,” he says. “If we suggest things, chances are we’re also going to have to implement them.”

Another argument for using an agency is the wide range of experience that they generally have. In-house teams are typically isolated within their own companies and industries. Agencies have experience across multiple industries and may be able to spot a good idea that an in-house team would miss.

“Social media changes so rapidly that when you work with an agency, they’re typically more on the cutting edge of what’s coming down the pike because they’ve got 100 people out there looking around at the new stuff and thinking about the new stuff and sitting in meetings saying ‘hey, have you heard this new use of class='blippr-nobr'>Foursquareclass="blippr-nobr">foursquare?’ ” explains Turner.

More people who interact with more clients have obvious benefits in keeping up to speed on the latest social media strategies. But many consultants would argue that it’s more important to have a deep understanding in a valuable niche. Both Keath and Bard have done consulting work for agencies that wanted to learn more about social media strategy.

Hybrid Approach

Most companies use some combination of the above three approaches. Turner says he often sees companies who have an in-house person “on the front line” who runs accounts and answers questions via social media, but turn to consultant or agencies for high-level social media strategy.

“It’s a collaborative approach, even if you go with an agency,” explains Tobin, whose agency handles the social media strategy for companies like Microsoft, Disney and Nike. “The client contributes the business objectives and knows what can and can’t be supported…the agency brings the expertise in the space [because it lives] in social media marketing all day. Together those can be really powerful.”

Series Supported by Webtrends/>

The Social Media Marketing Series is supported by Webtrends Apps, which lets you quickly create and publish class='blippr-nobr'>Facebookclass="blippr-nobr">Facebook, iPhone, iPad, and class='blippr-nobr'>Androidclass="blippr-nobr">Android apps. Learn more about it here or keep up with all Webtrends Social products by following their blogclass="blippr-nobr">blog.

More Business Resources from Mashable:

- Inside Group Buying: 7 Small Business Success Stories/> - How Social Search Will Transform the SEO Industry/> - 6 Tips on Starting a Digital Business from the Founder of Pandora/> - 5 Big Social Media Questions from Small Business Owners/> - 10 Essential Tips for Building Your Small Biz Team

Image courtesy of iStockphotoclass="blippr-nobr">iStockphoto, disorderly

Image Credit: class='blippr-nobr'>Flickrclass="blippr-nobr">Flickr, Pieter Musterd

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class="f-el">class="cov-twit">Follow Mashable Businessclass="s-el">class="cov-rss">Subscribe to the Business channelclass="f-el">class="cov-fb">Become a Fan on Facebookclass="s-el">class="cov-apple">Download our free apps for iPhone and iPad

To summarize an hour of dialogue, you should at some point have a product that your readers will want. You should give a lot of free content away, but even when it comes to content, you can charge for some amount, and if your content is good enough, people will pay for the premium stuff. "You can tell them about ninety percent, and they'll pay money just to get the final ten percent," so they know they have the whole picture, Clark says.



Making money blogging will not happen overnight. Sometimes it may seem like this is possible, but in reality, it takes a lot of work. "Build something that is real and something that matters to people," Rowse advises. He shared a story about how he launched a product one day and literally watched the sales roll in. It was as if he had hit a button, and the cash just started flowing, but then he realized he had been working hard up to that point for over two years, promoting the blog, writing two posts a day, doing SEO, press releases, etc. It wasn't overnight. 



You're not scalable, meaning that as your audience grows and more people want to connect with you, there will be a point where it just becomes too much. You have to set boundaries, otherwise you will have no time for yourself and your family. 



Eventually, you're going to have to "get real" about how many meaningful connections you can make in a day, Simone says, adding, "That's part of growing up in social media.”



When they say "no one actually wants that much authenticity," they mean that nobody cares about what you did last night, who you were with, what you had for breakfast, etc. In other words, don't show everybody everything about yourself, because you're not writing for you. You're writing for them. Be who you want to be for your audience. 



Ultimately, you're blogging and using social media to sell, but you can't just go around selling to people, because they won't have it. It just doesn't work. You have to make them want to buy. "You're selling yourself," says Clark. If you provide enough value to your audience, they will want to buy what you have to offer if it expands upon the value you're already giving them. "The content is the marketing," he says. 



Just having a blog is not a business. If you want it to be a business you have to treat it like one, Rowse says. This is basically an extension of number 2. 



The most important of the seven points is that no one is reading your blog. As Simone says, there are hundreds of millions of blogs, and that includes blogs on your topic. You have to write it in a way that is fresh, and either entertaining or informative. The good news is that you don't need "monster traffic". You just need a good, steady core audience for advertising to do well. 

<b>News</b> - Rep: Blake Lively, Penn Badgley Split! - Celebrity <b>News</b> <b>...</b>

"They're still good friends," an insider tells the new Us Weekly.

Fox <b>News</b> Crew Gets Scolded At Democratic Meeting (VIDEO)

A Fox News camera crew showed up unannounced at a Democratic meeting in Wisconsin Monday, prompting a confrontation that eventually forced the show's producer into a rather startling admission: he understands why Democrats are wary of ...

Telefuture | Old <b>News</b> Report | TVs Merging with Computers | Mediaite

Well, print media, you were warned. A 30 year old news report from NBC news, archived by Vortex Technology, discusses the future of television in a segment creatively entitled Telefuture. In it, they spend a lof of time examining the ...

bench craft company complaints
bench craft company complaints

<b>News</b> - Rep: Blake Lively, Penn Badgley Split! - Celebrity <b>News</b> <b>...</b>

"They're still good friends," an insider tells the new Us Weekly.

Fox <b>News</b> Crew Gets Scolded At Democratic Meeting (VIDEO)

A Fox News camera crew showed up unannounced at a Democratic meeting in Wisconsin Monday, prompting a confrontation that eventually forced the show's producer into a rather startling admission: he understands why Democrats are wary of ...

Telefuture | Old <b>News</b> Report | TVs Merging with Computers | Mediaite

Well, print media, you were warned. A 30 year old news report from NBC news, archived by Vortex Technology, discusses the future of television in a segment creatively entitled Telefuture. In it, they spend a lof of time examining the ...

bench craft company complaints bench craft company complaints

The Social Media Marketing Series is supported by Webtrends Apps, which lets you quickly create and publish Facebook, iPhone, iPad, and Android apps. Learn more about it here or keep up with all Webtrends Social products by following their blog.

Sadly there’s no magic rubric for deciding whether an in-house social media workforce, a social media consultant, or an agency will best be able to meet your particular business needs. Like almost every business decision, it depends on your business’s goals, budget and particular situation.

There are, however, definite pros and cons to each approach. We’ve highlighted some of the most important factors to consider for each style of social media team.

If your business has gone through the process of deciding which type of social media team to instate, let us know about the factors you considered and how you came to your final decision in the comments below.

In-House Team

Handling all social media efforts in-house is often the most affordable route for small business owners. Per hour, an agency’s time or a consultant’s time is going to be much more expensive than a full or part-time employee.

But it’s a big job. Jamie Turner, the coauthor of How To Make Money with Social Media recommends that businesses contribute no less than 25% of one full-time employee’s time to social media efforts. There are, however, benefits to making this time investment.

“People inside can move quicker and always have their finger on the pulse of the company, which makes it easier for them to respond [on social media],” Turner says.

Outsourcing your social media presence to an agency, in addition to costing more, can be slow on a day-to-day basis. An agency that is handling a Twitterclass="blippr-nobr">Twitter account might need to correspond with the company before it’s able to answer a question. Or it might need to ask for approval when unsure if an idea is in sync with the company’s overall business strategy.

Social Media Consultant

There isn’t really a narrow definition of “social media consultant.” Some have niche specialties and can help a company’s in-house team accomplish a specific social media task. Some help companies put an overall strategy in place and then leave the execution up to the company. And others are more like off-site community managers who execute the social media tasks for the company for an undetermined amount of time.

One advantage most consultants have over agencies is that they’re less expensive. “Typically you can pay [a consultant up to] $300 to $500 an hour,” says Jason Keath, the founder of social media education business Social Fresh. “If you put that same person inside of an agency, you’re adding a lot of overhead; you’re adding the corporate structure on top of it that has to be paid for as well.” Also on the cost front, consultants often require smaller time commitments than agencies.

Companies that are looking to fill in a specific aspect of their strategy often find hiring a consultant to be the best approach because they can seek a specific person that fits the niche they need help with. “If you have an in-house team, there may be a lot of knowledge there — and let’s say it’s digital PR knowledge,” says Keath, who has been consulting for the past two-and-a-half years. “But let’s say this team has never done blogger outreach before. Obviously bringing in somebody who has done blogger outreach is really going to speed up the process.”

Companies that plan to start their own in-house teams also may benefit from a consultant approach. Social media consultant Mirna Bard sees herself as an educator.

“Although an agency has results in mind, they are typically not the educators and they sometimes only look at the marketing aspect of social media,” she says. “They may also take a tactical instead of a strategic approach. Many times agencies or in-house teams are used mostly for development and execution; they are not meant to be business advisers who make overall business decisions.”

A consultant can help develop a social media strategy in line with your business objectives and play a role in teaching your in-house team how to execute it.

Agency

Most large PR agencies and many advertising agencies now have branches for handling a business’s entire social media presence. This kind of work differs from that of most consultants in that the agencies handle both strategy and execution. Jim Tobin, the president of Ignite Social Media, counts this among an agency’s advantages.

“Since we also execute for our clients, we have a good understanding of what’s realistic,” he says. “If we suggest things, chances are we’re also going to have to implement them.”

Another argument for using an agency is the wide range of experience that they generally have. In-house teams are typically isolated within their own companies and industries. Agencies have experience across multiple industries and may be able to spot a good idea that an in-house team would miss.

“Social media changes so rapidly that when you work with an agency, they’re typically more on the cutting edge of what’s coming down the pike because they’ve got 100 people out there looking around at the new stuff and thinking about the new stuff and sitting in meetings saying ‘hey, have you heard this new use of class='blippr-nobr'>Foursquareclass="blippr-nobr">foursquare?’ ” explains Turner.

More people who interact with more clients have obvious benefits in keeping up to speed on the latest social media strategies. But many consultants would argue that it’s more important to have a deep understanding in a valuable niche. Both Keath and Bard have done consulting work for agencies that wanted to learn more about social media strategy.

Hybrid Approach

Most companies use some combination of the above three approaches. Turner says he often sees companies who have an in-house person “on the front line” who runs accounts and answers questions via social media, but turn to consultant or agencies for high-level social media strategy.

“It’s a collaborative approach, even if you go with an agency,” explains Tobin, whose agency handles the social media strategy for companies like Microsoft, Disney and Nike. “The client contributes the business objectives and knows what can and can’t be supported…the agency brings the expertise in the space [because it lives] in social media marketing all day. Together those can be really powerful.”

Series Supported by Webtrends/>

The Social Media Marketing Series is supported by Webtrends Apps, which lets you quickly create and publish class='blippr-nobr'>Facebookclass="blippr-nobr">Facebook, iPhone, iPad, and class='blippr-nobr'>Androidclass="blippr-nobr">Android apps. Learn more about it here or keep up with all Webtrends Social products by following their blogclass="blippr-nobr">blog.

More Business Resources from Mashable:

- Inside Group Buying: 7 Small Business Success Stories/> - How Social Search Will Transform the SEO Industry/> - 6 Tips on Starting a Digital Business from the Founder of Pandora/> - 5 Big Social Media Questions from Small Business Owners/> - 10 Essential Tips for Building Your Small Biz Team

Image courtesy of iStockphotoclass="blippr-nobr">iStockphoto, disorderly

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For more Business coverage:

class="f-el">class="cov-twit">Follow Mashable Businessclass="s-el">class="cov-rss">Subscribe to the Business channelclass="f-el">class="cov-fb">Become a Fan on Facebookclass="s-el">class="cov-apple">Download our free apps for iPhone and iPad

To summarize an hour of dialogue, you should at some point have a product that your readers will want. You should give a lot of free content away, but even when it comes to content, you can charge for some amount, and if your content is good enough, people will pay for the premium stuff. "You can tell them about ninety percent, and they'll pay money just to get the final ten percent," so they know they have the whole picture, Clark says.



Making money blogging will not happen overnight. Sometimes it may seem like this is possible, but in reality, it takes a lot of work. "Build something that is real and something that matters to people," Rowse advises. He shared a story about how he launched a product one day and literally watched the sales roll in. It was as if he had hit a button, and the cash just started flowing, but then he realized he had been working hard up to that point for over two years, promoting the blog, writing two posts a day, doing SEO, press releases, etc. It wasn't overnight. 



You're not scalable, meaning that as your audience grows and more people want to connect with you, there will be a point where it just becomes too much. You have to set boundaries, otherwise you will have no time for yourself and your family. 



Eventually, you're going to have to "get real" about how many meaningful connections you can make in a day, Simone says, adding, "That's part of growing up in social media.”



When they say "no one actually wants that much authenticity," they mean that nobody cares about what you did last night, who you were with, what you had for breakfast, etc. In other words, don't show everybody everything about yourself, because you're not writing for you. You're writing for them. Be who you want to be for your audience. 



Ultimately, you're blogging and using social media to sell, but you can't just go around selling to people, because they won't have it. It just doesn't work. You have to make them want to buy. "You're selling yourself," says Clark. If you provide enough value to your audience, they will want to buy what you have to offer if it expands upon the value you're already giving them. "The content is the marketing," he says. 



Just having a blog is not a business. If you want it to be a business you have to treat it like one, Rowse says. This is basically an extension of number 2. 



The most important of the seven points is that no one is reading your blog. As Simone says, there are hundreds of millions of blogs, and that includes blogs on your topic. You have to write it in a way that is fresh, and either entertaining or informative. The good news is that you don't need "monster traffic". You just need a good, steady core audience for advertising to do well. 

bench craft company complaints

<b>News</b> - Rep: Blake Lively, Penn Badgley Split! - Celebrity <b>News</b> <b>...</b>

"They're still good friends," an insider tells the new Us Weekly.

Fox <b>News</b> Crew Gets Scolded At Democratic Meeting (VIDEO)

A Fox News camera crew showed up unannounced at a Democratic meeting in Wisconsin Monday, prompting a confrontation that eventually forced the show's producer into a rather startling admission: he understands why Democrats are wary of ...

Telefuture | Old <b>News</b> Report | TVs Merging with Computers | Mediaite

Well, print media, you were warned. A 30 year old news report from NBC news, archived by Vortex Technology, discusses the future of television in a segment creatively entitled Telefuture. In it, they spend a lof of time examining the ...

bench craft company complaints bench craft company complaints

<b>News</b> - Rep: Blake Lively, Penn Badgley Split! - Celebrity <b>News</b> <b>...</b>

"They're still good friends," an insider tells the new Us Weekly.

Fox <b>News</b> Crew Gets Scolded At Democratic Meeting (VIDEO)

A Fox News camera crew showed up unannounced at a Democratic meeting in Wisconsin Monday, prompting a confrontation that eventually forced the show's producer into a rather startling admission: he understands why Democrats are wary of ...

Telefuture | Old <b>News</b> Report | TVs Merging with Computers | Mediaite

Well, print media, you were warned. A 30 year old news report from NBC news, archived by Vortex Technology, discusses the future of television in a segment creatively entitled Telefuture. In it, they spend a lof of time examining the ...

bench craft company complaints bench craft company complaints

<b>News</b> - Rep: Blake Lively, Penn Badgley Split! - Celebrity <b>News</b> <b>...</b>

"They're still good friends," an insider tells the new Us Weekly.

Fox <b>News</b> Crew Gets Scolded At Democratic Meeting (VIDEO)

A Fox News camera crew showed up unannounced at a Democratic meeting in Wisconsin Monday, prompting a confrontation that eventually forced the show's producer into a rather startling admission: he understands why Democrats are wary of ...

Telefuture | Old <b>News</b> Report | TVs Merging with Computers | Mediaite

Well, print media, you were warned. A 30 year old news report from NBC news, archived by Vortex Technology, discusses the future of television in a segment creatively entitled Telefuture. In it, they spend a lof of time examining the ...

bench craft company complaints bench craft company complaints

foreclosure statistics

Foreclosure fraud is ruffling a lot of feathers on Wall Street, and while the full scope of losses remains unclear, even major banks are now acknowledging that this is a multi-billion-dollar disaster, not just a set of minor paperwork headaches.

So how bad will it get for Wall Street? There are several disaster scenarios in which the housing market simply shuts down, where the potential losses for Wall Street are simply incalculable. But even situations that do not directly rip apart the basic functioning of the mortgage system could be enough to shut down one or more big banks, creating serious trouble for the financial system, and a major test of the recent Wall Street reform bill.

JPMorgan Chase loves using its research department to push its political agenda, and the bank is currently characterizing the foreclosure fraud outbreak as a set of "process-oriented problems that can be fixed." That puts them in the rosy optimist camp for this crisis, and they're projecting a total of $55 billion to $120 billion in losses for the entire industry, spread out over a few years.

But take a look at the analysts' methodology. The actual scope of losses gets drastically larger if you just change a few arbitrary assumptions.

JPMorgan's analysts look at about $6 trillion in mortgages issued between 2005 and 2007—this is the height of the bubble, but it excludes plenty of lousy loans issued in 2003, 2004 and 2008. They then estimate defaults of $2 trillion and losses of $1.1 trillion on those defaults.

So far, these estimates are reasonable. According to Valparaiso University Law School Professor Alan White, banks lose about 58 percent of the value of a subprime loan at foreclosure. JPMorgan is estimating 55 percent. The notion that one-third of mortgages issued at the height of the bubble will default may seem extreme, but the analysis includes both first-lien mortgages and second-lien mortgages (home equity loans). For houses with multiple mortgages, there's going to be a double-hit when the first lien goes bad. Right now, the official statistics from Mortgage Bankers Association indicate that 14 percent of first mortgages are delinquent or in foreclosure. The longer unemployment stays near 10 percent, the higher that figure will go.

Things don't get out of control until JPMorgan's analysts start deploying their assumptions. First, they assume that Fannie and Freddie will attempt to sack banks with losses from 25 percent of the defaults they see. Of those 25 percent, they assume Fannie and Freddie will successfully force banks to eat losses on 40 percent, leading to total losses of 10 percent. Why 25 percent? Why 40 percent? The analysts don't say. JPMorgan expects private-sector investors to be able to saddle banks with just 5 percent of foreclosure losses, citing a host of technical legal hurdles that make it hard for investors to have their cases heard in court.

So JPMorgan's loss projections are nothing more than a guess—and a low-ball guess at that. JPMorgan is assuming that only five to 10 percent of looming foreclosure losses will actually hit big banks. Change that assumption—20 percent, 60 percent, 80 percent—and things get far worse for Wall Street than JPMorgan's "worst-case" scenario predicts.

Let's consider the exposures of a single bank to put things in context, and let's pick Bank of America, since analysts seem to agree that BofA has the most to worry about right now. They were a big issuer of mortgages themselves, but they also purchased the notoriously predatory Countrywide Financial and also picked up securitization behemoth Merrill Lynch in 2008, giving them far more problems (hilariously, BofA actually paid cash to acquire these balance-sheet-busters).

The most dire estimates for losses on Fannie and Freddie loans at BofA have come from Christopher Whalen at Institutional Risk Analytics and Branch Hill Capital. Whalen has estimated $50 billion in Fannie and Freddie losses for the megabank, while Branch Hill has estimated $70 billion.

The trick is, BofA has $2.1 trillion in total exposure to Fannie and Freddie, according to Whalen. That means even Branch Hill's massive loss projection only amounts to a loss rate of about 3.5 percent.

As of July 2010, Fannie Mae had a serious delinquency rate of 4.82 percent—these are loans where families have missed at least three payments, but haven't been evicted. For Freddie Mac, the number is 3.83 percent. Not all of those losses can be pushed back on the banks, but those numbers will go up as the unemployment rate stays high. Tip the scales just a few percentage points and it's easy to envision catastrophic losses for banks.

But there's reason to believe that Bank of America is in even worse shape with regard to Fannie and Freddie than any of its peers. Countrywide was the single largest provider of loans to Fannie Mae during the housing bubble. Literally 28 percent of the loans Fannie Mae bought up in 2007 came from Countrywide. Fannie even featured a full-page, smiling photograph of Countrywide CEO Angelo Mozilo in their 2003 Annual Report (.pdf, see page 16).

It's much easier for banks to lose money on bad loans they sold to the GSEs than it is for them to lose money on securities they sold to purely private-sector investors. The fact that Bank of America's most notorious wing was the top provider to Fannie Mae during the peak years of the housing bubble does not bode well for the bank's balance sheet.

But this is just exposure to Fannie and Freddie. The private sector is angry about all kinds of things—from wronged borrowers to deceived investors. Investors are already organizing against both mortgage servicers—for improperly handling troubled loans—and against investment banks—for selling them garbage. They aren't just angry about fraudulent foreclosures—evidence is mounting that mortgage servicers can't even handle the profits from mortgages correctly, and aren't sending investors reliable, verifiable payments.

Yesterday investors sent a letter pressuring Countrywide's servicing arm to push losses from bad mortgage bonds back on the bank that sold them. Legally, it's a complicated maneuver, since Countrywide itself issued those bonds—but that just shows the multiple levels at which megabanks like BofA are exposed to fraud losses. Their original sale of mortgages to borrowers, the packaging of those mortgages into securities, the handling of payments and foreclosures, and the accounting for all of these activities—all of this is about to be subjected to serious fraud examinations by people who are trying to make money.

Up until yesterday, big banks thought they had a get-out-of-jail free card on investor lawsuits. Investors have to bring together 25 percent of the buyers of any mortgage bond in order to sue the bank that issued it—even if the actual lawsuit is an open-and-shut fraud case. Investors had not been cooperating. But yesterday's letter to Countrywide is a big deal—even though it's not (yet) a lawsuit, some of the biggest names in finance were going after Countrywide's cash: BlackRock, PIMCO and even the New York Federal Reserve.

Bill Frey, who runs the hedge fund Greenwich Capital, has organized a massive clearinghouse of mortgage investors for the express purpose of bringing lawsuits against big banks that issued bogus mortgage-backed securities. He told me this afternoon that he's about to move: In the next couple of weeks Greenwich and other investors will bring big lawsuits against major banks.

Will these combined troubles be enough to sink any big banks? If investors can win a couple of lawsuits, easily.

Foreclosure fraud is ruffling a lot of feathers on Wall Street, and while the full scope of losses remains unclear, even major banks are now acknowledging that this is a multi-billion-dollar disaster, not just a set of minor paperwork headaches.

So how bad will it get for Wall Street? There are several disaster scenarios in which the housing market simply shuts down, where the potential losses for Wall Street are simply incalculable. But even situations that do not directly rip apart the basic functioning of the mortgage system could be enough to shut down one or more big banks, creating serious trouble for the financial system, and a major test of the recent Wall Street reform bill.

JPMorgan Chase loves using its research department to push its political agenda, and the bank is currently characterizing the foreclosure fraud outbreak as a set of "process-oriented problems that can be fixed." That puts them in the rosy optimist camp for this crisis, and they're projecting a total of $55 billion to $120 billion in losses for the entire industry, spread out over a few years.

But take a look at the analysts' methodology. The actual scope of losses gets drastically larger if you just change a few arbitrary assumptions.

JPMorgan's analysts look at about $6 trillion in mortgages issued between 2005 and 2007—this is the height of the bubble, but it excludes plenty of lousy loans issued in 2003, 2004 and 2008. They then estimate defaults of $2 trillion and losses of $1.1 trillion on those defaults.

So far, these estimates are reasonable. According to Valparaiso University Law School Professor Alan White, banks lose about 58 percent of the value of a subprime loan at foreclosure. JPMorgan is estimating 55 percent. The notion that one-third of mortgages issued at the height of the bubble will default may seem extreme, but the analysis includes both first-lien mortgages and second-lien mortgages (home equity loans). For houses with multiple mortgages, there's going to be a double-hit when the first lien goes bad. Right now, the official statistics from Mortgage Bankers Association indicate that 14 percent of first mortgages are delinquent or in foreclosure. The longer unemployment stays near 10 percent, the higher that figure will go.

Things don't get out of control until JPMorgan's analysts start deploying their assumptions. First, they assume that Fannie and Freddie will attempt to sack banks with losses from 25 percent of the defaults they see. Of those 25 percent, they assume Fannie and Freddie will successfully force banks to eat losses on 40 percent, leading to total losses of 10 percent. Why 25 percent? Why 40 percent? The analysts don't say. JPMorgan expects private-sector investors to be able to saddle banks with just 5 percent of foreclosure losses, citing a host of technical legal hurdles that make it hard for investors to have their cases heard in court.

So JPMorgan's loss projections are nothing more than a guess—and a low-ball guess at that. JPMorgan is assuming that only five to 10 percent of looming foreclosure losses will actually hit big banks. Change that assumption—20 percent, 60 percent, 80 percent—and things get far worse for Wall Street than JPMorgan's "worst-case" scenario predicts.

Let's consider the exposures of a single bank to put things in context, and let's pick Bank of America, since analysts seem to agree that BofA has the most to worry about right now. They were a big issuer of mortgages themselves, but they also purchased the notoriously predatory Countrywide Financial and also picked up securitization behemoth Merrill Lynch in 2008, giving them far more problems (hilariously, BofA actually paid cash to acquire these balance-sheet-busters).

The most dire estimates for losses on Fannie and Freddie loans at BofA have come from Christopher Whalen at Institutional Risk Analytics and Branch Hill Capital. Whalen has estimated $50 billion in Fannie and Freddie losses for the megabank, while Branch Hill has estimated $70 billion.

The trick is, BofA has $2.1 trillion in total exposure to Fannie and Freddie, according to Whalen. That means even Branch Hill's massive loss projection only amounts to a loss rate of about 3.5 percent.

As of July 2010, Fannie Mae had a serious delinquency rate of 4.82 percent—these are loans where families have missed at least three payments, but haven't been evicted. For Freddie Mac, the number is 3.83 percent. Not all of those losses can be pushed back on the banks, but those numbers will go up as the unemployment rate stays high. Tip the scales just a few percentage points and it's easy to envision catastrophic losses for banks.

But there's reason to believe that Bank of America is in even worse shape with regard to Fannie and Freddie than any of its peers. Countrywide was the single largest provider of loans to Fannie Mae during the housing bubble. Literally 28 percent of the loans Fannie Mae bought up in 2007 came from Countrywide. Fannie even featured a full-page, smiling photograph of Countrywide CEO Angelo Mozilo in their 2003 Annual Report (.pdf, see page 16).

It's much easier for banks to lose money on bad loans they sold to the GSEs than it is for them to lose money on securities they sold to purely private-sector investors. The fact that Bank of America's most notorious wing was the top provider to Fannie Mae during the peak years of the housing bubble does not bode well for the bank's balance sheet.

But this is just exposure to Fannie and Freddie. The private sector is angry about all kinds of things—from wronged borrowers to deceived investors. Investors are already organizing against both mortgage servicers—for improperly handling troubled loans—and against investment banks—for selling them garbage. They aren't just angry about fraudulent foreclosures—evidence is mounting that mortgage servicers can't even handle the profits from mortgages correctly, and aren't sending investors reliable, verifiable payments.

Yesterday investors sent a letter pressuring Countrywide's servicing arm to push losses from bad mortgage bonds back on the bank that sold them. Legally, it's a complicated maneuver, since Countrywide itself issued those bonds—but that just shows the multiple levels at which megabanks like BofA are exposed to fraud losses. Their original sale of mortgages to borrowers, the packaging of those mortgages into securities, the handling of payments and foreclosures, and the accounting for all of these activities—all of this is about to be subjected to serious fraud examinations by people who are trying to make money.

Up until yesterday, big banks thought they had a get-out-of-jail free card on investor lawsuits. Investors have to bring together 25 percent of the buyers of any mortgage bond in order to sue the bank that issued it—even if the actual lawsuit is an open-and-shut fraud case. Investors had not been cooperating. But yesterday's letter to Countrywide is a big deal—even though it's not (yet) a lawsuit, some of the biggest names in finance were going after Countrywide's cash: BlackRock, PIMCO and even the New York Federal Reserve.

Bill Frey, who runs the hedge fund Greenwich Capital, has organized a massive clearinghouse of mortgage investors for the express purpose of bringing lawsuits against big banks that issued bogus mortgage-backed securities. He told me this afternoon that he's about to move: In the next couple of weeks Greenwich and other investors will bring big lawsuits against major banks.

Will these combined troubles be enough to sink any big banks? If investors can win a couple of lawsuits, easily.

BREAKING <b>NEWS</b>: Drunk &amp; Naked Charlie Sheen Trashes Hotel Room <b>...</b>

Trouble seems to follow Charlie Sheen - whether it be in Los Angeles, Apsen, or now, to New York. Police were summoned to the posh Plaza hotel early Tuesday, where a drunken and naked Sheen had trashed his hotel room, RadarOnline.com ...

Nielsen: 362000 Monthly Users For <b>News</b> Corp.&#39;s Times Paywall <b>...</b>

News International's silence on subscriber numbers for Times and Sunday Times online content continues, three and a half months after the paywall went up. But today audience research company Nielsen has taken a stab at estimating the ...

Viral Football: A Funeral For Sky Sports <b>News</b> (On Freeview) » Who <b>...</b>

2 Responses to “Viral Football: A Funeral For Sky Sports News (On Freeview)”. Greg says: October 26, 2010 at 10:10 am. I'm pretty sure this is what my dad does every Saturday. Every week, without fail, he phones me up complaining about ...

bench craft company complaints
bench craft company complaints

BREAKING <b>NEWS</b>: Drunk &amp; Naked Charlie Sheen Trashes Hotel Room <b>...</b>

Trouble seems to follow Charlie Sheen - whether it be in Los Angeles, Apsen, or now, to New York. Police were summoned to the posh Plaza hotel early Tuesday, where a drunken and naked Sheen had trashed his hotel room, RadarOnline.com ...

Nielsen: 362000 Monthly Users For <b>News</b> Corp.&#39;s Times Paywall <b>...</b>

News International's silence on subscriber numbers for Times and Sunday Times online content continues, three and a half months after the paywall went up. But today audience research company Nielsen has taken a stab at estimating the ...

Viral Football: A Funeral For Sky Sports <b>News</b> (On Freeview) » Who <b>...</b>

2 Responses to “Viral Football: A Funeral For Sky Sports News (On Freeview)”. Greg says: October 26, 2010 at 10:10 am. I'm pretty sure this is what my dad does every Saturday. Every week, without fail, he phones me up complaining about ...

bench craft company complaints bench craft company complaints

Foreclosure fraud is ruffling a lot of feathers on Wall Street, and while the full scope of losses remains unclear, even major banks are now acknowledging that this is a multi-billion-dollar disaster, not just a set of minor paperwork headaches.

So how bad will it get for Wall Street? There are several disaster scenarios in which the housing market simply shuts down, where the potential losses for Wall Street are simply incalculable. But even situations that do not directly rip apart the basic functioning of the mortgage system could be enough to shut down one or more big banks, creating serious trouble for the financial system, and a major test of the recent Wall Street reform bill.

JPMorgan Chase loves using its research department to push its political agenda, and the bank is currently characterizing the foreclosure fraud outbreak as a set of "process-oriented problems that can be fixed." That puts them in the rosy optimist camp for this crisis, and they're projecting a total of $55 billion to $120 billion in losses for the entire industry, spread out over a few years.

But take a look at the analysts' methodology. The actual scope of losses gets drastically larger if you just change a few arbitrary assumptions.

JPMorgan's analysts look at about $6 trillion in mortgages issued between 2005 and 2007—this is the height of the bubble, but it excludes plenty of lousy loans issued in 2003, 2004 and 2008. They then estimate defaults of $2 trillion and losses of $1.1 trillion on those defaults.

So far, these estimates are reasonable. According to Valparaiso University Law School Professor Alan White, banks lose about 58 percent of the value of a subprime loan at foreclosure. JPMorgan is estimating 55 percent. The notion that one-third of mortgages issued at the height of the bubble will default may seem extreme, but the analysis includes both first-lien mortgages and second-lien mortgages (home equity loans). For houses with multiple mortgages, there's going to be a double-hit when the first lien goes bad. Right now, the official statistics from Mortgage Bankers Association indicate that 14 percent of first mortgages are delinquent or in foreclosure. The longer unemployment stays near 10 percent, the higher that figure will go.

Things don't get out of control until JPMorgan's analysts start deploying their assumptions. First, they assume that Fannie and Freddie will attempt to sack banks with losses from 25 percent of the defaults they see. Of those 25 percent, they assume Fannie and Freddie will successfully force banks to eat losses on 40 percent, leading to total losses of 10 percent. Why 25 percent? Why 40 percent? The analysts don't say. JPMorgan expects private-sector investors to be able to saddle banks with just 5 percent of foreclosure losses, citing a host of technical legal hurdles that make it hard for investors to have their cases heard in court.

So JPMorgan's loss projections are nothing more than a guess—and a low-ball guess at that. JPMorgan is assuming that only five to 10 percent of looming foreclosure losses will actually hit big banks. Change that assumption—20 percent, 60 percent, 80 percent—and things get far worse for Wall Street than JPMorgan's "worst-case" scenario predicts.

Let's consider the exposures of a single bank to put things in context, and let's pick Bank of America, since analysts seem to agree that BofA has the most to worry about right now. They were a big issuer of mortgages themselves, but they also purchased the notoriously predatory Countrywide Financial and also picked up securitization behemoth Merrill Lynch in 2008, giving them far more problems (hilariously, BofA actually paid cash to acquire these balance-sheet-busters).

The most dire estimates for losses on Fannie and Freddie loans at BofA have come from Christopher Whalen at Institutional Risk Analytics and Branch Hill Capital. Whalen has estimated $50 billion in Fannie and Freddie losses for the megabank, while Branch Hill has estimated $70 billion.

The trick is, BofA has $2.1 trillion in total exposure to Fannie and Freddie, according to Whalen. That means even Branch Hill's massive loss projection only amounts to a loss rate of about 3.5 percent.

As of July 2010, Fannie Mae had a serious delinquency rate of 4.82 percent—these are loans where families have missed at least three payments, but haven't been evicted. For Freddie Mac, the number is 3.83 percent. Not all of those losses can be pushed back on the banks, but those numbers will go up as the unemployment rate stays high. Tip the scales just a few percentage points and it's easy to envision catastrophic losses for banks.

But there's reason to believe that Bank of America is in even worse shape with regard to Fannie and Freddie than any of its peers. Countrywide was the single largest provider of loans to Fannie Mae during the housing bubble. Literally 28 percent of the loans Fannie Mae bought up in 2007 came from Countrywide. Fannie even featured a full-page, smiling photograph of Countrywide CEO Angelo Mozilo in their 2003 Annual Report (.pdf, see page 16).

It's much easier for banks to lose money on bad loans they sold to the GSEs than it is for them to lose money on securities they sold to purely private-sector investors. The fact that Bank of America's most notorious wing was the top provider to Fannie Mae during the peak years of the housing bubble does not bode well for the bank's balance sheet.

But this is just exposure to Fannie and Freddie. The private sector is angry about all kinds of things—from wronged borrowers to deceived investors. Investors are already organizing against both mortgage servicers—for improperly handling troubled loans—and against investment banks—for selling them garbage. They aren't just angry about fraudulent foreclosures—evidence is mounting that mortgage servicers can't even handle the profits from mortgages correctly, and aren't sending investors reliable, verifiable payments.

Yesterday investors sent a letter pressuring Countrywide's servicing arm to push losses from bad mortgage bonds back on the bank that sold them. Legally, it's a complicated maneuver, since Countrywide itself issued those bonds—but that just shows the multiple levels at which megabanks like BofA are exposed to fraud losses. Their original sale of mortgages to borrowers, the packaging of those mortgages into securities, the handling of payments and foreclosures, and the accounting for all of these activities—all of this is about to be subjected to serious fraud examinations by people who are trying to make money.

Up until yesterday, big banks thought they had a get-out-of-jail free card on investor lawsuits. Investors have to bring together 25 percent of the buyers of any mortgage bond in order to sue the bank that issued it—even if the actual lawsuit is an open-and-shut fraud case. Investors had not been cooperating. But yesterday's letter to Countrywide is a big deal—even though it's not (yet) a lawsuit, some of the biggest names in finance were going after Countrywide's cash: BlackRock, PIMCO and even the New York Federal Reserve.

Bill Frey, who runs the hedge fund Greenwich Capital, has organized a massive clearinghouse of mortgage investors for the express purpose of bringing lawsuits against big banks that issued bogus mortgage-backed securities. He told me this afternoon that he's about to move: In the next couple of weeks Greenwich and other investors will bring big lawsuits against major banks.

Will these combined troubles be enough to sink any big banks? If investors can win a couple of lawsuits, easily.

Foreclosure fraud is ruffling a lot of feathers on Wall Street, and while the full scope of losses remains unclear, even major banks are now acknowledging that this is a multi-billion-dollar disaster, not just a set of minor paperwork headaches.

So how bad will it get for Wall Street? There are several disaster scenarios in which the housing market simply shuts down, where the potential losses for Wall Street are simply incalculable. But even situations that do not directly rip apart the basic functioning of the mortgage system could be enough to shut down one or more big banks, creating serious trouble for the financial system, and a major test of the recent Wall Street reform bill.

JPMorgan Chase loves using its research department to push its political agenda, and the bank is currently characterizing the foreclosure fraud outbreak as a set of "process-oriented problems that can be fixed." That puts them in the rosy optimist camp for this crisis, and they're projecting a total of $55 billion to $120 billion in losses for the entire industry, spread out over a few years.

But take a look at the analysts' methodology. The actual scope of losses gets drastically larger if you just change a few arbitrary assumptions.

JPMorgan's analysts look at about $6 trillion in mortgages issued between 2005 and 2007—this is the height of the bubble, but it excludes plenty of lousy loans issued in 2003, 2004 and 2008. They then estimate defaults of $2 trillion and losses of $1.1 trillion on those defaults.

So far, these estimates are reasonable. According to Valparaiso University Law School Professor Alan White, banks lose about 58 percent of the value of a subprime loan at foreclosure. JPMorgan is estimating 55 percent. The notion that one-third of mortgages issued at the height of the bubble will default may seem extreme, but the analysis includes both first-lien mortgages and second-lien mortgages (home equity loans). For houses with multiple mortgages, there's going to be a double-hit when the first lien goes bad. Right now, the official statistics from Mortgage Bankers Association indicate that 14 percent of first mortgages are delinquent or in foreclosure. The longer unemployment stays near 10 percent, the higher that figure will go.

Things don't get out of control until JPMorgan's analysts start deploying their assumptions. First, they assume that Fannie and Freddie will attempt to sack banks with losses from 25 percent of the defaults they see. Of those 25 percent, they assume Fannie and Freddie will successfully force banks to eat losses on 40 percent, leading to total losses of 10 percent. Why 25 percent? Why 40 percent? The analysts don't say. JPMorgan expects private-sector investors to be able to saddle banks with just 5 percent of foreclosure losses, citing a host of technical legal hurdles that make it hard for investors to have their cases heard in court.

So JPMorgan's loss projections are nothing more than a guess—and a low-ball guess at that. JPMorgan is assuming that only five to 10 percent of looming foreclosure losses will actually hit big banks. Change that assumption—20 percent, 60 percent, 80 percent—and things get far worse for Wall Street than JPMorgan's "worst-case" scenario predicts.

Let's consider the exposures of a single bank to put things in context, and let's pick Bank of America, since analysts seem to agree that BofA has the most to worry about right now. They were a big issuer of mortgages themselves, but they also purchased the notoriously predatory Countrywide Financial and also picked up securitization behemoth Merrill Lynch in 2008, giving them far more problems (hilariously, BofA actually paid cash to acquire these balance-sheet-busters).

The most dire estimates for losses on Fannie and Freddie loans at BofA have come from Christopher Whalen at Institutional Risk Analytics and Branch Hill Capital. Whalen has estimated $50 billion in Fannie and Freddie losses for the megabank, while Branch Hill has estimated $70 billion.

The trick is, BofA has $2.1 trillion in total exposure to Fannie and Freddie, according to Whalen. That means even Branch Hill's massive loss projection only amounts to a loss rate of about 3.5 percent.

As of July 2010, Fannie Mae had a serious delinquency rate of 4.82 percent—these are loans where families have missed at least three payments, but haven't been evicted. For Freddie Mac, the number is 3.83 percent. Not all of those losses can be pushed back on the banks, but those numbers will go up as the unemployment rate stays high. Tip the scales just a few percentage points and it's easy to envision catastrophic losses for banks.

But there's reason to believe that Bank of America is in even worse shape with regard to Fannie and Freddie than any of its peers. Countrywide was the single largest provider of loans to Fannie Mae during the housing bubble. Literally 28 percent of the loans Fannie Mae bought up in 2007 came from Countrywide. Fannie even featured a full-page, smiling photograph of Countrywide CEO Angelo Mozilo in their 2003 Annual Report (.pdf, see page 16).

It's much easier for banks to lose money on bad loans they sold to the GSEs than it is for them to lose money on securities they sold to purely private-sector investors. The fact that Bank of America's most notorious wing was the top provider to Fannie Mae during the peak years of the housing bubble does not bode well for the bank's balance sheet.

But this is just exposure to Fannie and Freddie. The private sector is angry about all kinds of things—from wronged borrowers to deceived investors. Investors are already organizing against both mortgage servicers—for improperly handling troubled loans—and against investment banks—for selling them garbage. They aren't just angry about fraudulent foreclosures—evidence is mounting that mortgage servicers can't even handle the profits from mortgages correctly, and aren't sending investors reliable, verifiable payments.

Yesterday investors sent a letter pressuring Countrywide's servicing arm to push losses from bad mortgage bonds back on the bank that sold them. Legally, it's a complicated maneuver, since Countrywide itself issued those bonds—but that just shows the multiple levels at which megabanks like BofA are exposed to fraud losses. Their original sale of mortgages to borrowers, the packaging of those mortgages into securities, the handling of payments and foreclosures, and the accounting for all of these activities—all of this is about to be subjected to serious fraud examinations by people who are trying to make money.

Up until yesterday, big banks thought they had a get-out-of-jail free card on investor lawsuits. Investors have to bring together 25 percent of the buyers of any mortgage bond in order to sue the bank that issued it—even if the actual lawsuit is an open-and-shut fraud case. Investors had not been cooperating. But yesterday's letter to Countrywide is a big deal—even though it's not (yet) a lawsuit, some of the biggest names in finance were going after Countrywide's cash: BlackRock, PIMCO and even the New York Federal Reserve.

Bill Frey, who runs the hedge fund Greenwich Capital, has organized a massive clearinghouse of mortgage investors for the express purpose of bringing lawsuits against big banks that issued bogus mortgage-backed securities. He told me this afternoon that he's about to move: In the next couple of weeks Greenwich and other investors will bring big lawsuits against major banks.

Will these combined troubles be enough to sink any big banks? If investors can win a couple of lawsuits, easily.

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