The Psychology of Subprime Mortgages

The Psychology of Subprime Mortgages

via Boing Boing

Category:
Posted on: August 9, 2007 10:19 AM, by Jonah Lehrer

The poo is hitting the fan: all those sub-prime mortgages given out so recklessly over the past two years are getting their interest rates re-adjusted. And that, of course, is when the foreclosures begin.

By most measures, sub-prime loans are a bad idea. Look, for example, at the popular 2/28 loan, which consists of a low, fixed-interest rate for the first two years and a much higher, adjustable rate for the next twenty-eight. Most people taking out a 2/28 loan can't afford the higher interest rates that will hit later on. It's not unusual for interest payments on a 2/28 loan to double within four years. (That's why you're seeing such high foreclosure rates in the sub-prime market.)

So why do people take out sub-prime loans? Don't they realize that they won't be able to afford the ensuing 28 years of mortgage payments? I think a big part of the reason sub-prime loans remain so seductive, even when the financial terms are so atrocious, is that they take advantage of a dangerous flaw built into our brain. This flaw is rooted in our emotional brain, which tends to overvalue immediate gains (like a new house) at the expense of future costs (high interest rates). Our feelings are thrilled by the prospect of a new home, but can't really grapple with the long-term fiscal consequences of the decision. Our impulsivity encounters little resistance, and so we sign on the bottom line. We want the house. We'll figure out how to pay for it later.

The best evidence for this idea comes from the lab of Jonathan Cohen. Cohen's clever experiment went like this: he stuck people in an fMRI machine and made them decide between a small Amazon gift certificate that they could have right away, or a larger gift certificate that they'd receive in 2 to 4 weeks. Contrary to rational models of decision-making, the two options activated very different neural systems. When subjects contemplated gift certificates in the distant future, brain areas associated with rational planning (the Promethean circuits of the prefrontal cortex) were more active. These cortical regions urge us to be patient, to wait a few extra weeks for the bigger gift certificate.

On the other hand, when subjects started thinking about getting a gift certificate right away, brain areas associated with emotion - like the midbrain dopamine system and NAcc - were turned on. These are the cells that tell us to take out a mortgage we can't afford, or run up credit card debt when we should be saving for retirement. They are our impulsive pleasure seekers, the hedonists inside our head.

By manipulating the amount of money on offer in each situation, Cohen and his collaborators could watch this neural tug of war unfold. They saw the fierce argument between reason and feeling, as our mind was pulled in contradictory directions. Our ultimate decision--to save for the future or to indulge in the present--was determined by whichever region showed greater activation. More emotions meant more impulsivity.

This discovery has important implications. (A more recent paper by the Cohen lab extends the theory.) For starters, it locates the neural source for many of our financial errors. When we opt for a 2/28 mortgage, we are acting like experimental subjects choosing the wrong gift certificate. Because the emotional parts of our brain reliably undervalue the future - life is short and they want pleasure now - we end up delaying saving until tomorrow (and tomorrow and tomorrow.) George Loewenstein, a neuroeconomist at Carnegie Mellon University and a collaborator on the Cohen paper, thinks that understanding how we make decisions will help economists develop better public policies: "Our emotions are like programs that evolved to solve important and recurring problems in our distant past," he says. "They are not always well suited to the decisions we make in modern life. It's important to know how our emotions lead us astray so that we can design incentives and programs to help compensate for our irrational biases."

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Threat Level - Wired Blogs

Analysis: New Law Gives Government Six Months to Turn Internet and Phone Systems into Permanent Spying Architecture - UPDATED

By Ryan Singel August 06, 2007 | 2:11:02 AMCategories: Surveillance

A new law expanding the government's spying powers gives the Bush Administration a six-month window to install possibly permanent back doors in the nation's communication networks. The legislation was passed hurriedly by Congress over the weekend and signed into law Sunday by President Bush.

The bill, known as the Protect America Act, removes the prohibition on warrantless spying on Americans abroad and gives the government wide powers to order communication service providers such as cell phone companies and ISPs to make their networks available to government eavesdroppers.

The Administration pushed for passage of the changes to close what it called a "surveillance gap," referring to a long-standing feature of the nation's surveillance laws that required the government to get court approval to capture communications inside the United States.

While the nation's spy laws have been continually loosened since 9/11, the Administration never pushed for the right to tap the nation's domestic communication networks until a secret court recently struck down a key pillar of the government's secret spying program.

The Administration argues that the world's communication networks now route many foreign to foreign calls and emails through switches in the United States.

Prior to the law's passage, the nation's spy agencies, such as the National Security Agency and the Defense Intelligence Agency, didn't need any court approval to spy on foreigners so long as the wiretaps were outside the United States.

Now, those agencies are free to order services like Skype, cell phone companies and arguably even search engines to comply with secret spy orders to create back doors in domestic communication networks for the nation's spooks. While it's unclear whether the wiretapping can be used for domestic purposes, the law only requires that the programs that give rise to such orders have a "significant purpose" of foreign intelligence gathering.

The law:

• Defines the act of reading and listening into American's phone calls and internet communications when they are "reasonably believed" to be outside the country as not surveillance.



• Gives the government 6 months of extended powers to issue orders to "communication service providers," to help with spying that "concerns persons reasonably believed to be outside the United States." The language doesn't require the surveillance to only target people outside the United States, only that some of it does.



• Forces Communication Service providers to comply secretly, though they can challenge the orders to the secret Foreign Intelligence Court. Individuals or companies given such orders will be paid for their cooperation and can not be sued for complying.



• Makes any program or orders launched in the next six months perpetually renewable after the six month "sunset" of the new powers last for a year after being authorized



• Grandfathers in the the current secret surveillance program -- sometimes referred to as the Terrorist Surveillance Program -- and any others that have been blessed by the Foreign Intelligence Surveillance Court.



• Requires the Attorney General to submit to the secret surveillance court its reasons why these programs aren't considered domestic spying programs, but the court can only throw out those reasons if it finds that they are "clearly erroneous."



• Requires the Attorney General to tell Congress twice a year about any incidents of surveillance abuse and give statistics about how many surveillance programs were started and how many directives were issued.



• Makes no mention of the Inspector General, who uncovered abuses of the Patriot Act by the FBI after being ordered by Congress to audit the use of powerful self-issued subpoenas, is not mentioned in the bill.

In short, the law gives the Administration the power to order the nation's communication service providers -- which range from Gmail, AOL IM, Twitter, Skype, traditional phone companies, ISPs, internet backbone providers, Federal Express, and social networks -- to create possibly permanent spying outposts for the federal government.

These outposts need only to have a "significant" purpose of spying on foreigners, would be nearly immune to challenge by lawsuit, and have no court supervision over their extent or implementation.

Abuses of the outposts will be monitored only by the Justice Department, which has already been found to have underreported abuses of other surveillance powers to Congress.

In related international news, Zimbabwe's repressive dictator Robert Mugabe also won passage of a law allowing the government to turn that nation's communication infrastructure into a gigantic, secret microphone.

UPDATE: This analysis originally said that the orders entered under the new rules could be renewed indefinitely. That is not accurate. I conflated the ability of the government to continue indefinitely the programs under way under FISA before the law was signed, with the section that says that the programs under the new law go for a full year, despite the 6 month sunset.

That said, if a future bill includes the same grandfather clause that this bill has, the spying outposts could easily permanent.

Those interested in seeing how I made this mistake, look at Section 6 of the bill. I regret the error.

UPDATE 2: James Risen, the New York Times reporter who broke the story of the warrantless wiretapping program, has an analysis piece here.

See Also:

• More Known Unknowns in NSA Spy Controversy: Secret Appeals Courts, Tea Leaves and the Mineshaft Gap



• Bush Administration Reportedly Rejects NSA Spying Compromise Bill



• Democrats Halt Move to Revamp Spying Laws



• Patrick Radden Keefe's Slate piece Wiretap at Will

Photo: Room 641A at AT&T's internet switching facility in San Francisco. Former AT&T technician Mark Klein says the room is a secret internet spying outpost for the government.

ISSUES - Where Presidental Candidates Stand

clipped from flickr.com

At Procter & Gamble, The Good And Bad Of Web 2.0 Tools

It once bet its collaboration strategy on Microsoft tools. It's expanded to consider more Web 2.0 tools, but getting them implemented and used is far from easy.

By
J. Nicholas
Hoover,
InformationWeek

June 23, 2007

URL:http://www.informationweek.com/story/showArticle.jhtml?articleID=200000229

Ever since A.G. Lafley be-came CEO of Procter & Gamble in 2000, he has pushed employees to improve how they collaborate with one another and with partners in order to develop new products faster. With a supportive CEO and today's myriad Web 2.0 options, what possible problems could face Joe Schueller, who's driving P&G's adoption of new collaboration tools?

How about e-mail, which Schueller describes as the biggest barrier to employee use of more interactive and effective tools. "As a sender of an e-mail, I control the agenda of everyone around me," Schueller says. E-mailers decide who has permission to read a message, and the Reply To All button ensures that peripheral participants will be prompted long after they have lost all interest. Blogs, in contrast, beg for comments from those most interested. Schueller also faces the harrumphing of employees who see anything other than e-mail as an addition to their workloads. "We consistently hear that information posted to the intranet is incremental work," he says.

Schueller's got an e-mail problem Photo by Alex Dunne

Business technology execs at last week's Enterprise 2.0 conference in Boston are past the new concept stage; they're looking to put practical technology in place. "A year ago, I met with a group of Fortune 25 CEOs who didn't know anything about wikis. Now they ask me how these tools can integrate with their existing content management systems," says Kim Polese, CEO of open source systems integrator SpikeSource, which is selling a suite of Web 2.0 tools that includes Movable Type blogs and Socialtext wikis.

P&G provides a study of how Enterprise 2.0 will take shape given the scope of its project and the way it draws on tools from startups as well as big-name vendors. In 2005, P&G laid plans for a Microsoft-centric collaboration initiative, with instant messaging, unified communications, and presence using Live Communications Server; Web conferencing with Live Meeting; and content management and collaboration via SharePoint. About 80,000 employees use Microsoft IM, and 20,000 have moved to Outlook. P&G has a few SharePoint sites running, and the major rollout begins in August.

For the past year, Schueller has been leading an Enterprise 2.0 effort with the backing of CIO Filippo Passerini that aims to bring employees a more diverse toolset. The company has brought on Movable Type blogging software, which employees have used to create hundreds of blogs, including ones by the VP of design (inspired by a blog by General Motors design guru Bob Lutz); by the public relations department on how to discuss company issues externally; and by Schueller, read mostly by IT folks. In the next few months, P&G will launch social networking intended to make it easier to find people with needed expertise.

Even as Microsoft and IBM keep expanding their Web 2.0-style collaboration capabilities--with social networking tools like Lotus' Connections and Microsoft SharePoint Server 2007's support for blogs, wikis, and calendar sharing--many companies are concluding that one platform won't be enough.

"If I do everything in Microsoft, what does that do to your modularity, to flexibility?" says Schueller, whose title is innovation manager in P&G's Global Business Services. "I wouldn't generalize that just to Microsoft. It's all the big vendors." IT also needs to learn how to incorporate tools employees bring in themselves, he says.
Beyond Google And Microsoft

In enterprise search, P&G is looking beyond its main vendor, too. It uses Google's search appliance, but Schueller has found that the concept behind page rank--relevance based on links--doesn't always work in business, because information inside the company isn't always linked. Plus, he's concerned that Google's reliance on keywords doesn't leave enough room for fuzzy ideas that aren't captured well in one or two words.

So the company's testing a product from Connectbeam that works with Google. Connectbeam lets employees share bookmarks and tag articles, pages, and documents with descriptive words. When an employee searches for something using the Google appliance, Connectbeam results--related tags and bookmarks--are returned alongside the Google results.

P&G also is revamping its BEA Systems-based Web portal, adding RSS feeds of news and business information to let people personalize the portal. Over time, the company expects to suggest feeds for employees based on their roles and the Web sites they frequent.

But how does Schueller get anyone to use these tools, if they're seen as extra work?

One way is to look at how people do something today and offer a tool that fits the same process in a slightly simpler way. He offers an example of a P&G executive who, every time he traveled to meet with one regional manager, would put the takeaways into PowerPoint and e-mail them to the others. Instead, IT created a page in Microsoft SharePoint where the exec could post his presentations, and where they could be saved in a more efficient data store than every person's in-box.

CIO Passerini's strategy for assessing whether Web 2.0 tools make sense for P&G has been to "do this to us first," says Schueller--to let IT teams experiment with technologies and assign a different IT manager to each Web 2.0 product area. The IT team sees this as an opportunity to make a difference in a company where brand managers, not technologists, are the rock stars. "IT, particularly in a soap company, is in the back room pedaling," says Schueller. "This is our chance to champion something."

IT departments at other companies also see this Enterprise 2.0 moment as a chance to shine. Among hundreds of organizations represented at last week's conference were Bank of America, Boeing, the Central Intelligence Agency, FedEx, Morgan Stanley, and Pfizer.

Motorola is one of the biggest adopters of Web collaboration tools, with 4,400 blogs, 4,200 wiki pages, and 2,600 people actively doing content tagging and social bookmarking using Scuttle software, with more accessing the system. Under an initiative called Intranet 2.0, the tools are used mostly for research and information sharing--so instead of salespeople developing a whole new pitch for every client, they can reuse pieces of pitches posted on a wiki. Motorola employees also can more easily find people with experience in specific areas using social networking software from Visible Path or checking author pages on wikis. "It actually lets people see new relationships--to see maps of what smart people and like people have done," says Toby Redshaw, Motorola's VP in charge of Enterprise 2.0 technologies. The result is that the company is building knowledge centers around particular problems and products.

That's the end goal for Schueller--that employees and partners searching for information on the intranet, creating profiles, tagging documents, and sharing bookmarks make the content more valuable. Call it social software or user-generated content, the risk is that if people don't find the tool useful out of the gate, they won't contribute the content that builds this virtuous cycle. IT teams have a critical opportunity to make it worth people's while. As one IT exec at the conference put it, "If they come, they will build it."

SECURITY - Iron Key Flash Drive

clipped from gizmodo.com safety in a stick Secure IronKey Flash Drive Will Self-Destruct in 3...2...1... Designed to be the world's most secure flash drive, the IronKey employs military-grade AES hardware-based encryption using its IronKey Cryptochip. The encryption keys are stored on the drive itself and your password is required in conjunction with the keys to access and decrypt files. If you forget your password, you may be in trouble; after ten consecutive failed password attempts, the IronKey self-destructs (internally) and erases everything on the drive using "flash-trash" technology that physically overwrites every byte, making the data completely unrecoverable. more » 9:12 PM ON THU JUL 26 2007 BY KARSON THOMPSON 9,449 views, 19 comments Latest by VladX: @PRELUDE No need for thermite really, just equip it with a Sony lithium battery and enjoy the ensuing fireworks.... more

HILARIOUS - Michel Gondry Solves a Rubiks Cube with his Nose

PANO - Autostitch™ :: a new dimension in automatic image stitching

clipped from www.cs.ubc.ca Autostitch™ is the world's first fully automatic 2D image stitcher. Capable of stitching full view panoramas without any user input whatsoever, Autostitch is a breakthrough technology for panoramic photography, VR and visualisation applications. This is the first solution to stitch any panorama completely automatically, whether 1D (horizontal) or 2D (horizontal and vertical). Autostitch is built using cutting edge research from the AI lab at UBC, but it's incredibly simple to use! Just select a set of photos, and Autostitch does the rest: digital photos in, panoramas out. Try the free demo (for Windows): Download the FREE demo version now!

OPEN SOURCE - hugin - Panorama photo stitcher

hugin - Panorama photo stitcher

With hugin you can assemble a mosaic of photographs into a complete immersive panorama, stitch any series of overlapping pictures and much more.

CRUCIAL INFO - USB Flash Drives Mobilized

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FLV VIDEO CONVERSION - SUPER © .

SUPER © .: "Current version SUPER © v2007.build.23 (July 4, 2007)
changelog


SUPER © Simplified Universal Player Encoder & Renderer.
A GUI to ffmpeg, MEncoder, mplayer, x264, mppenc,
ffmpeg2theora & the theora/vorbis RealProducer plugIn.

If you need a simple, yet very efficient tool to convert (encode) or play any Multimedia file,
without reading manuals or spending long hours training, then SUPER © is all you need.
It is a Multimedia Encoder and a Multimedia Player, easy-to-use with 1 simple click."

ANONYMOUS EMAIL - sympa.

sympa.: "Current version S.Y.M.P.A v3.276 (July 29, 2005)

SYMPA (Send_Your_Mail_Privately_&_Anonymously)
A multi-function FreeWare to be used ONLY for the following educational / training purposes:

o Send totally Anonymous E-Mails. (Through Tunnel Proxy)
o Send SMS messages via E-Mail. (Depending on your area phone service provider)
o Chat with friends in private and public mode.
o Built in web browser for easier and lighter use of PC resources when a quick surf is needed.
o Check, convert to decimal and resolve IPv4 to addresses or vice versa.
o Register / UnRegister DirectShow Filters installed on your PC.

A New Direct link in the SYMPA browser section will open a PROXY web site for your convenience.
This web site provides a daily updated PROXY list helping you find a better selection among
hundreds of proxies.
The PROXY web site will even open automatically in case the SYMPA's PROXY entry field was
left empty.

The Re-designed internal Tunnel Proxy engine has been improved for speed and reliability.
SYMPA has a very user-friendly interface along with 2 intercept buttons allowing a visual
interpretation of all DATA exchange occurring between your "

ENCRYPTION - 96CRYPT.

96CRYPT.: "Current version 96Crypt v4.950 (September 8, 2005)
changelog

96Crypt is a multi-feature file/FOLDER EnCryption/DeCryption program
combining several powerful features in one single application.

o 96Crypt is a file/FOLDER EnCryption/DeCryption program using highly trusted
block ciphers together with several collision-resistant HMAC-HASH algorithms.

96Crypt features several worldwide trusted block ciphers algorithms such as:
3DES, Blowfish, MARS, RijnDael-AES, SERPENT or Twofish.
All our block ciphers operate in CTR or CBC mode with a MAC mechanism
providing the highest level of confidentiality and integrity to your data.

The user-provided secret password is processed with one of the following HASH functions:
HAVAL, MD5, RMD, SHA-1, SHA256, SHA384, SHA512 or TIGER.
The key used for EnCryption/DeCryption is calculated based on a user-provided typed
password or file-password. After several rounds of HASHing / SALTing the entered or
selected password, relying on casc"

Google Helps Nonprofits Conquer Google Earth -- Google Maps -- InformationWeek

Google Helps Nonprofits Conquer Google Earth

The project also includes online forums to enhance communications and connect interested users of Google Earth with experienced developers.

By
Thomas
Claburn
InformationWeek
June 27, 2007 04:00 PM

Google on Tuesday launched a new initiative to help nonprofit organizations communicate and present data using Google Earth.

Google Earth Outreach aims to provide information including help documents, video tutorials, and case studies that describe how to create Keyhole Markup Language (KML) layers for Google Earth. The project also includes online forums to enhance communications between nonprofit organizations and to put interested users of Google Earth in touch with experienced developers.

Examples of how nonprofit organizations can use geospatial data to communicate can be seen in the new layers, assembled by the Global Heritage Fund, EarthWatch, and TransFair USA, that Google added to Google Earth's Global Awareness folder.

In April, Google added a layer detailing the Darfur crisis to the Global Awareness folder, along with several other layers. The Darfur layer remains the only one turned on by default.

Other layers in that folder -- the United Nations Environment Programme Atlas of Our Changing Environment, the World Wildlife Fund's Conservation Projects, Appalachian Mountaintop Removal, and Jane Goodall's Gombe Chimpanzee Blog -- must be manually selected before they're visible on Google Earth.

Google also is offering nonprofits the opportunity to apply online for Google Earth Pro license grants. Google Earth Pro normally costs $400. Organizations awarded a free license also receive additional technical support and the opportunity to have their work featured in the Google Earth Outreach Showcase, an online gallery of new Google Earth layers.

"Google's mission is all about making information more accessible and useful," said Elliot Schrage, VP of global communications and public affairs, in a statement. "With programs like Google Earth Outreach, we seek to help create a 'marketplace of ideas' in the growing not-for-profit sector that rivals and complements what we offer commercial enterprises."

The power of satellite imagery hasn't escaped nonprofit organizations. Earlier this month at the International Digital Earth Symposium, Amnesty International USA introduced a project called Eyes on Darfur designed to monitor vulnerable villages in Sudan and to deter violence there.

Last week, Reuters reported that Air Force Lt. Gen. David Deptula, deputy chief of staff for intelligence, surveillance, and reconnaissance, saw online mapping software like Google Earth as a potential security threat, but acknowledged the technology could not be undone.

Since Google Earth debuted in June, 2005, it has been downloaded more than 200 million times.

InformationWeek -- Enterprise Software News

InformationWeek -- Enterprise Software News: "Google Earth Enterprise Gains Web Browser Integration

The updated software will allow IT administrators to embed a 2D view of Google Earth data into any Web application and to make enterprise mashups."

SCARRY - Storm Worm Erupts Into Worst Virus Attack In 2 Years

Storm Worm Erupts Into Worst Virus Attack In 2 Years

Storm worm authors are blasting the Internet with two types of attacks, and both are aimed at building up their botnet.

By
Sharon
Gaudin
InformationWeek

July 24, 2007 04:19 PM

The Storm worm authors are waging a multi-pronged attack and generating the largest virus attack some researchers say they've seen in two years.

"We are basically in the midst of an incredibly large attack," said Adam Swidler, a
senior manager with security company Postini. "It's the most sustained attack that we've seen. There's been nine to 10 days straight days of attack at this level."

Swidler said in an interview with InformationWeek that the attack started a little more than a week ago, and Postini since then has recorded 200 million spam e-mails luring users to malicious Web sites. Before this attack, an average day sees about 1 million virus-laden e-mails, according to Postini. Last Thursday, however, the company tracked 42 million Storm-related messages in that day alone. As of Tuesday afternoon, Postini researchers were predicting they would see that day between 4 million and 6 million virus e-mails -- 99% of them associated with the Storm worm.

While the number of spam e-mails has dropped significantly, it's still far above normal levels, so Swidler isn't ready to say the attack is over.

The viruses are not embedded in the e-mails or in attachments. The e-mails, many of them otherwise empty, contain a link to a compromised Web site where machines are infected with a generic downloader. This helps pull the computers into the malware authors' growing botnet, while also leaving them open for further infection at a later date.

"This is designed to add computers to the botnet," said Swidler. "That's first and foremost their goal."

But the Storm worm authors aren't contenting themselves with this one attack vector.

Paul Henry, VP of technologies with Secure Computing, said in an interview that the electronic greeting card spam scam that the Storm worm authors launched early in July is stronger than ever. He noted that a friend of his has a company with 100 users and they're being hit with about 300 e-card spams every day.

"Back in December, we saw a huge spike in e-card spams because of the holiday," he added. "We are at the levels we were seeing back in December right now Most security professionals thought it would show up for Independence Day and then fade immediately, but it's been escalating for the last few weeks. It's definitely a pain point."

Again, the e-card spam message, which install rootkits in the infected computers, are working to build a botnet. Henry could not say if it's the same botnet as the other messages are building.

"I have seen thousands of these e-mails since Independence Day. It's got to be working for them or they wouldn't keep doing it," said Henry.

Just a few weeks ago, the Storm worm authors began trying to trick users with fraudulent e-mails warning unsuspecting users about virus or spyware infections. Users around the world were receiving spam messages claiming that viruses or spyware had been detected on the users' systems. It was another attempt to lure users to malicious sites where their computers could be infected

HALARIOUSLY WEIRD - Japanese Noodle Commercials

Hungry (for giant prehistoric beasts)?

In early ’90s Japan, mobs of hungry primeval men hunted gigantic prehistoric creatures in a series of fanciful “Cup Noodle” commercials featuring stop-motion animation by Kim Blanchette.

Sea creatures

Uintatherium

Moa

Saiga antelope

Check here for other beasts in the series, including the mammoth, pterodactyl and giant warthog.

2007.07.16 | 2 Comments | Animal, Art, Giant, Relic, Video