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Follow-up: Why Are We Adopting the Stupidest Possible Payment System in the US?

Mother Jones

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Yesterday I wondered aloud why it was taking so long for chip-and-PIN credit cards to come to America, and why, now that they’re finally here, we’re getting lame chip-and-signature cards instead.

First things first. There’s actually not a lot of mystery about why it’s taken so long, something I’ve written about before. Roughly speaking, the answer is that fraud detection in the US improved dramatically in the 90s, and that reduced the motivation to make the switch. Conversely, fraud detection in Europe was more primitive, so it made a lot of financial sense to transition to chip-and-PIN. Most of the transition costs were paid for by reduced fraud.

So that explains that. But now that we’re finally making the switch, why are we moving toward chip-and-signature? The whole point of smart cards is that the chip makes them hard to counterfeit and the PIN makes them hard for thieves to use. Chip-and-signature cards are still hard to counterfeit, but they can be used by thieves just as easily as current mag stripe cards. Plus they aren’t universally compatible in the rest of the world.

The answer, apparently, is that banks don’t want to do it:

The changeover in this country will be costly—as much as $35 billion, by some estimates…. According to the National Retail Federation, merchants are willing to spend that money if the banks issue the right kind of smart cards. Retailers want what are called chip-and-PIN cards, which require that a PIN be entered for each transaction.

….At a news conference Tuesday, Mallory Duncan, the federation’s senior vice president and general counsel, called chip-and-signature cards a bad idea. “It’s like locking the front door and leaving the back door open,” he said. “It would be a shame to spend all that money for a half-baked solution.”

The American Bankers Association said the marketplace should be able to accommodate both chip-and-signature and chip-and-PIN smart cards. “It’s the only way for this complex payments system to continue to deliver convenience and meet the needs of consumers,” said Jeff Sigmund, the association’s senior director of public relations.

Well, sure, the marketplace can accommodate both, but banks are apparently planning to issue signature-only cards, not cards that can be used both ways. Why?

“Merchants see the PIN as a more secure option, but it doesn’t make a lot of sense to the banks because it really doesn’t do anything,” said Alphonse Pascual, a senior analyst for security, risk and fraud at Javelin Strategy & Research. “It would be like putting a new deadbolt on your front door and then putting gum in the lock. It’s the lock that’s protecting you, not the gum.”

This makes no sense. A PIN foils thieves. What’s really going on here is that it’s merchants who mostly pay the costs of fraud these days, so banks don’t care much about it. Apparently, this means they just don’t want to deal with the hassle of PIN cards:

There’s also the concern that Americans, who tend to have a variety of credit cards, would have a tough time managing multiple PINS.

“If the consumer doesn’t want to memorize all those numbers, they might choose the same PIN for each card,” said Randy Vanderhoof, executive director of the nonprofit Smart Card Alliance. “Using one PIN to protect 10 different cards in your wallet now exposes you to the potential for increased fraud.”

PIN technology could pose a challenge to credit card issuers, which must deal with users who can’t remember their PIN or need to change it. That was a problem when Canada switched to chip-and-PIN credit cards, but people eventually got accustomed to it.

This is a combination of insulting and crazy. Americans are already accustomed to using PINs, and would have no more trouble managing multiple PINs than Danes and Italians do. And while using one PIN for ten cards might not exactly be best practice, it’s certainly better than no PIN at all. How could it possibly increase fraud? Signature cards can be used with nothing more than a scrawl.

And then we get to the last paragraph. If cards have PINs, banks and card issuers will have to spend a bit of money helping people change their PINs.

And that seems to be what we’re left with. Merchants are willing to make the switch. Consumers would get used to the switch pretty quickly. But card issuers don’t want to bother because it might increase their customer support costs a bit during the transition.

Once again, the American financial industry is proving that there’s nothing they can’t screw up. For the last two decades they’ve been just about the least consumer-enhancing industry in the country, and they’re continuing their value-destroying ways in the transition to smart cards. I guess we shouldn’t really be surprised.

Bottom line: This really begs for regulation from the Fed or Congress. With all the public outrage over recent data breaches, you’d think this would be a relatively bipartisan kind of issue. I understand that it involves regulation, and Republicans have a knee-jerk opposition to regulation of any kind, but honestly, this is precisely the kind of regulation Congress is made for. Do your jobs, folks.

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Follow-up: Why Are We Adopting the Stupidest Possible Payment System in the US?

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9 Times Chris Christie Denied Using a Bridge for Political Revenge

Mother Jones

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UPDATE: On Thursday, Christie said, “I am outraged and deeply saddened to learn that not only was I misled by a member of my staff, but this completely inappropriate and unsanctioned conduct was made without my knowledge.”

On Wednesday morning, news outlets released emails that strongly imply that in September a top aide to New Jersey Republican Gov. Chris Christie planned a dangerous traffic jam near the George Washington Bridge to punish the Democratic mayor of Fort Lee. After over seven hours of silence, Christie—a possible presidential candidate in 2016—released a statement denying he had knowledge of the aide’s actions. Up until then, Christie and his aides made numerous statements claiming his office had no involvement in the scandal. Here’s the evolution of how Christie responsed to the scandal, dating back to September:

“Kevin Roberts, a spokesman for the Christie campaign, said that any notion that Mr. Sokolich faced retribution for not endorsing the governor was ‘crazy.'” –The Wall Street Journal, September 17, 2013
â&#128;&#139; “A spokesman for Christie, Michael Drewniak, said the governor had nothing to do with the lane closures: ‘The governor of the state of New Jersey does not involve himself in traffic studies,’ Drewniak said.” –The Star-Ledger (November 13, 2013)
“I was the guy out there, in overalls and a hat. I actually was the guy working the cones out there. You really are not serious with that question.”â&#128;&#139; -Christie to WYNC (December 2, 2013)
“Mr. Christie also said he believed Mr. Baroni’s his top executive appointee at the Port Authority explanation that the purpose of the closures was a traffic study. ‘I don’t think that Senator Baroni would not tell the truth,’ Mr. Christie said.” –The Wall Street Journal (December 13, 2013)
“Christie said Friday the political drama surrounding the issue was ‘created and manufactured,’ further characterizing it as ‘a whole lot of hullabaloo.'” –CNN (December 13, 2013)
“I don’t have any recollection of ever having met the mayor of Fort Lee in my four years…He was not somebody that was on my radar screen in any way–politically, professionally, or in any other way” –CNN (December 13, 2013)
“When asked about that claims that the closures were ordered for political retribution, Christie said ‘absolutely, unequivocally not.'” Politico (December 13, 2013)
“I know you guys are obsessed with this, I’m not. I’m really not. It’s just not that big a deal.” -Christie to Talking Points Memo (December 19, 2013)

And, finally, Wednesday:

“What I’ve seen today for the first time is unacceptable. I am outraged and deeply saddened to learn that not only was I misled by a member of my staff, but this completely inappropriate and unsanctioned conduct was made without my knowledge. One thing is clear: this type of behavior is unacceptable and I will not tolerate it because the people of New Jersey deserve better. This behavior is not representative of me or my Administration in any way, and people will be held responsible for their actions.”â&#128;&#139; –Statement, January 8, 2013

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9 Times Chris Christie Denied Using a Bridge for Political Revenge

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Do Auto Body Shops Routinely Screw the Disabled?

Mother Jones

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Via Andrew Sullivan, today brings news that auto body shops discriminate against people with disabilities. John List and Uri Gneezy recruited a group of men to get quotes for fixing a small ding in the side, and it turns out that if the men were in wheelchairs they got quotes that were about 30 percent higher. However, if the recruits mentioned that they were getting three quotes that day, everyone got about the same price. So what’s this all about?

It turned out that mechanics were just making an economic calculation when they gave out price quotes. Put differently they were engaging in classic, blatantly unfair, economic discrimination by taking advantage of a customer’s disability. Luckily, policymakers may already have the solution for this sort of discrimination in place. The Americans with Disabilities Act has forced businesses to facilitate easy access for the disabled, making a task like obtaining multiple quotes possible. Now we just need to make it predictable enough for mechanics to catch up.

Hmmm. If I’m reading this right, the authors are suggesting that the body shop guys took a look at the folks in the wheelchairs and figured that they probably wouldn’t drive around to get multiple quotes because they were disabled. So the body shop guys thought they could get away with padding their quotes a bit. I’m not sure I have a better explanation for this,1 but I’m still a little skeptical. These were all folks who drove to the auto shop. Why would the mechanics figure that someone in a wheelchair wouldn’t be willing to drive to three repair shops?

I don’t suppose I have any readers who have worked in a body shop, do I? Is there some kind of ancient lore among repair shops that folks in wheelchairs are less likely to get multiple quotes? This is a bit of a curiosity.

1Actually, I might. Someone should school me if I’m wrong about this, but I suspect that a lot of people assume (either consciously or otherwise) that people with physical disabilities are also a little bit mentally disabled. This might be because people with mental disabilities often have poor body control, so the association gets made without even thinking about it. If this is the case, the higher quotes might have nothing to do with mobility per se. It might be because the repair shop folks just assumed that the guys in wheelchairs had a little less on the ball than the non-disabled customers.

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Do Auto Body Shops Routinely Screw the Disabled?

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Watch: Sammy Salmonella Explains the Government Shutdown Fiore Cartoon

Mother Jones

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Mark Fiore is a Pulitzer Prize-winning editorial cartoonist and animator whose work has appeared in the Washington Post, the Los Angeles Times, the San Francisco Examiner, and dozens of other publications. He is an active member of the American Association of Editorial Cartoonists, and has a website featuring his work.

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Watch: Sammy Salmonella Explains the Government Shutdown Fiore Cartoon

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Do We Have Any Clue How to Fight Terrorism?

Mother Jones

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On the 12th anniversary of 9/11, Dylan Matthews decides to find out whether we’ve learned much of anything about fighting terrorism. Luckily, a trio of researchers produced a broad review of the counterterrorism literature in 2009. Unluckily, they didn’t find much to review:

The first problem the review identifies is that barely any of the terrorism literature even tries to answer questions about effective counterterrorism. “Of the over 20,000 reports regarding terrorism that we located,” the authors write, “only about 1.5 percent of this massive literature even remotely discussed the idea that an evaluation had been conducted of counter-terrorism strategies.”

They found 354 studies that did, however. Further culling left them 80 studies that could be reasonably said to evaluate the effectiveness of counterterrorism measures. Of these, only 21 of those 80 studies “appeared to at least attempt to connect an outcome or effect with a program through a minimally rigorous scientific test.” Of those 21, only 10 met the Campbell review’s methodological standards. Three of those were medical studies dealing with the effects of bioterrorism, leaving seven for the review to consider.

But wait! It’s even worse than that. Not only did they find only seven relevant studies—which is probably less than the number of studies of LOLcats in popular culture over the past decade1—but those seven studies were all basically negative. None of the counterterrorism strategies studied actually reduced terrorism.

In fairness, it’s possible there are classified studies we don’t know about. It’s also worth pointing out that supposedly rigorous academic studies aren’t the be-all and end-all of human knowledge. It’s perfectly reasonable for us to take actions based on our best intuitions about how our fellow human beings react to various carrots and sticks.

Nonetheless—and even granting that this is a difficult area to study—this is a pretty remarkable finding. You’d think that testing our intuitions about what works and what doesn’t would be of far greater interest that it is. I guess we’d all rather just blather and toss bombs around instead.

1After I wrote this, I got curious. Are there more studies of LOLcats than of counterterrorism strategies? That depends on your definition, but at the very least it’s a close call. A quick search of Google Scholar turned up an awful lot of citations for LOLcats. Among them were “Wants moar: Visual media’s use of text in LOLcats and silent film,” “I @m teh 1337 h@xx0r: A closer look at Internet Englishes and their sociolinguistic implications,” “I Can Haz an Internet Aesthetic?!? LOLCats and the Digital Marketplace,” and “I Can Has Cultural Influenz?: The Effects of Internet Memes on Popular Culture.” Among other things, this demonstrates that scholars of popular culture all apparently think they’re a lot cleverer than they really are.

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Do We Have Any Clue How to Fight Terrorism?

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Meet the Wu-Tang Clan of Immigration Reform

Mother Jones

The Senate’s Gang of Eight won a major battle for comprehensive immigration reform Thursday, getting its compromise bill through after months of debate and occasional internal strife. The gang’s work calls to mind another famous team of disparate personalities who came together to produce a groundbreaking work 20 years earlier. I’m talking, of course, about the Wu-Tang Clan. While the Gang of Eight members have yet to see Killa Bee status, at least their bill now only has to make it through one chamber, not 36. Check out each senator’s Wu-Tang doppelgänger.

Chuck Schumer / RZA
Schumer (D-N.Y.) has taken the lead on immigration reform, with the New York Daily News calling him the bill’s “broker, dealmaker, adviser and shaman.” Schumer is also the one who formally introduced the bill to the Senate, with every other gang member’s name listed after his. RZA is the Wu-Tang Clan’s leader, producing the group’s albums as well as many of its members’ solo efforts. Schumer is a notorious publicity hound, with Bob Dole once saying the most dangerous place in DC is between Chuck and a camera. The RZA, meanwhile, has been shooting and acting in films since 1999, most recently writing, directing, and starring in The Man with the Iron Fists.

Lindsey Graham / Ghostface Killah
The South Carolina Republican is instrumental to immigration reform, providing the gang with a prominent conservative figure. Ghostface, a former roommate of the RZA, helped bring together the Clan. Similarly, Graham, who worked with Schumer previously on immigration issues, helped recruit some of the gang’s other Republican members. Ghostface’s second solo album, Supreme Clientele, has been credited with saving the Wu-Tang image. Graham will look to secure his own gang’s credibility by fighting for immigration reform in the House—although a Republican backlash is already forming.

John McCain / GZA
GZA is the oldest and most experienced member of the Clan, having put out a record before the group even formed. McCain (R-Ariz.), too, has been there before. He advocated for an expanded visa program during his 2000 presidential run and worked with Ted Kennedy on an ill-fated immigration reform act that provided a blueprint for later efforts. While McCain’s debate experience means he might hold his own in an iron mic duel, no evidence suggests he could best the GZA at chess.

Dick Durbin / Inspectah Deck
Inspectah Deck was Wu-Tang’s more measured member, keeping a laid-back attitude in sharp contrast with some of his fellow Clan members. He was still a major part of the group’s first few albums, however, dropping major verses while staying largely outside the spotlight.

While Durbin (D-Ill.) doesn’t garner as much attention as gang members Schumer or McCain, he remains the Senate’s majority whip, with his relative national anonymity masking a great deal of behind-the-scenes power.

Michael Bennet / Masta Killa
Bennet (D-Colo.) is new to Congress, having been the superintendent of Denver schools before he was appointed to fill former Secretary of the Interior Ken Salazar’s seat in 2009. He dove right into immigration reform, though, cosponsoring the DREAM Act before joining the Gang of Eight late last year. Like Bennet, Masta Killa was the most inexperienced member of his clan, and admitted he had never even performed before joining. He was also the last member to put out a solo album, releasing the critically acclaimed No Said Date in 2004.

Marco Rubio / Method Man
Both Rubio (R-Fla.) and Method Man were the young breakout stars of their respective groups. Rubio has garnered plenty of media attention for his work on immigration reform, with many observers pointing to it as a step in his eventual presidential run. Method Man got his own track on the Wu-Tang debut before he became the first Clan member to go solo with the platinum-selling Tical. It remains to be seen whether Rubio can achieve Meth’s level of success, though if things go south he could always team up with Bill Nelson (D-Fla.) for a Fox sitcom.

Bob Menendez / Ol’ Dirty Bastard
Menendez, a powerful New Jersey Democrat, has been the subject of numerous allegations throughout his Senate tenure—some imagined and some less so. Likewise, ODB’s exploits were the stuff of legend, from robbery and drug charges to a run from the law that ended at a Philly McDonald’s. Many of the tales passed down about ODB since his 2004 death are exaggerated or untrue, yet despite (or perhaps because of) them he is one of the Clan’s most beloved members. Menendez, likewise, retained his seat in last year’s election by nearly 20 points.

Jeff Flake / Raekwon
Esquire named Jeff Flake (R-Ariz.) one of the 10 best members of Congress in 2008, when he was still in the House. Raekwon’s solo debut, Only Built 4 Cuban Linx…, has been called one of the best Wu-Tang solo records and ranked among the greatest albums of all time. Despite the acclaim, he hasn’t reached the popularity or album sales of fellow Clan members like Method Man and Ghostface Killah. While Raekwon’s stock is rising, thanks in part to his collaboration with Kanye West, Flake has seen his own popularity drop after he voted against background checks for gun owners.

BONUS: Orrin Hatch / U-God
While not a member of the Gang of Eight, Hatch (R-Utah) played a pivotal role in immigration reform by voting it out of the Judiciary Committee and supporting it on the floor. He clashed with the gang members on occasion, though, offering a series of amendments that were hard to stomach for Democrats like Durbin. U-God, a founding Clan member, ended up suing the Wu-Tang Music Group in 2008, claiming he was owed $170,000 for his work on 8 Diagrams. Like Hatch, he was able to patch things up and remains tight with the group.

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Meet the Wu-Tang Clan of Immigration Reform

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