Article 43

 

Tuesday, May 12, 2009

Big, Bad Banks

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Short sales are one of the tools to avoid FORECLOSURE if all other workout options are exhausted. It’s always in the best interest of the homeowner, the community, and the investor to avoid foreclosure
- Amy Bonitatibus, Fannie Mae spokeswoman

Banks Blocking Way Out Of Foreclosure Crisis

By Ryan Grom
Huffington Post

Brett Ellis, a real estate agent in Fort Myers, Fla., was thrilled when he got an offer for a property in Bell Tower Park in May 2008.

"It was a gorgeous property on the corner lot,” Ellis told the Huffington Post. The owner, who had lost his job, wanted to sell the apartment for a loss rather than go into foreclosure, a strategy known as a short sale.

The offer was for $350,000, and Ellis, who is a certified distressed property expert trained in executing such sales, knew it was as good an offer as he was going to get in this market. He immediately sent the paperwork into the bank.

He waited for four months. The bank finally told him it wouldn’t take anything less than $400,000—a price Ellis was sure he could never get. In September, the buyer’s agent called to say, “You know what, we gotta move on, we gotta buy something else.”

Now the property is sitting vacant as it slides into foreclosure. Its former owner’s credit is destroyed, and the house is losing value every day. “God knows what the condition is today,” Ellis said, adding he’d be surprised if the property is worth more than $290,000 when it resurfaces on the market. Add in the legal expenses involved in a foreclosure, and the bank cost itself a hundred thousand dollars more that it otherwise would have.

It’s a scenario that plays out constantly, everywhere in the United States. In a time of collapsing real estate values, where one in five homes are now under water, a short sale is increasingly the only option before foreclosure. It is less damaging to credit scores and spares the homeowner the shame of foreclosure.

It is also a better option for banks: According to one analysis, short sales resulted in loan losses of only 19 percent, compared with an average loss of 40 percent on homes sold after foreclosure.

So why aren’t these sales more widely used?

The broad answer is that the American financial system simply can’t handle a collapse of this magnitude. The fates of the banking and real estate industries are intertwined. But they don’t work together—and the result is that they end up working against each other.

The more precise answer is related to securitization, the method by which banks bundle together different mortgages and slice them up and sell the pieces to various investors. Securitization makes negotiating a real estate sale that results in a loss nearly impossible.

“The most significant aspect is that so many of the banks’ mortgages have been securitized, put together and bundled, sold off to Iceland or China or some godforsaken place,” said Dave Liniger, founder and chairman of global real estate company Re/Max, in an interview with the Huffington Post. “The bank has to go through all of the various people who are stakeholders and it becomes a very lengthy process, and the bank is turning off the realtors by not even getting answers back to them, sometimes for months.”

Banks have little incentive to untie those bundles. Since mortgages are listed on the banks’ balance sheets at the value of the original loan, if they complete a short sale they must record a loss on their balance sheets. That would explain why banks drag the process out as long as possible. In Ellis’ case, the property is sitting vacant a year after the first offer, allowing the bank to list the original value on its balance sheet all along.

According to research firm Campbell Communications, only 23 percent of short sale transactions are actually completed. “Three out of four potential short sale transactions fail, principally because the mortgage servicer takes too long to respond to the offer,” said Tom Popik, author of a February survey of real estate agents. “When these same properties are later sold it further depresses real estate prices.”

Congress has had as much success untangling this mess as real estate agents.

“We’ve been trying to figure out probably for close to two years now why so few mortgages are being modified when it seems to make absolute business sense for the person holding the mortgage to modify rather than foreclose or to take a smaller loss selling it rather than a bigger loss foreclosing on it,” said Rep. Brad Miller (D-N.C.).

Miller points his finger at securitization. Once the mortgages are bundled and sliced up into different pieces, known as tranches, the owners of the pieces get paid back according to a certain pecking order. Senior investors get paid back first and if there’s a loss, the most junior investors won’t get anything. It’s those investors who are blocking short sales.

“The people with the least senior tranches have no reason to agree to the modification because they take a complete loss and the people in the most senior tranches don’t lose anything. So they’ve managed to structure their mortgages in a way that makes it almost impossible to modify or sell short,” said Miller.

Miller sponsored legislation to reform the bankruptcy code to allow judges to rewritethose contracts, taking away the ability of junior investors to sue and encouraging them to negotiate. But the House-approved measure died in the Senate, 51-45, killed last week by Republicans and 12 Democrats, leaving it 15 votes short of the 60 needed to overcome a filibuster.

Dave Liniger of Re/Max said the provision would have changed the bargaining landscape. Lenders would have had much more of an incentive to take a loss on a short sale rather than see a judge unilaterally change the terms of a mortgage.

“It was a negotiating ploy more than anything,” Liniger said.

“It’s disappointing,” said Financial Services Committee chairman Barney Frank (D-Mass.) of the banks’ tendency to foreclose rather than agree to a sale. “I’ve heard that and I’ve been trying to press the banks not to do that.”

Without bankruptcy reform, the only power the government has is persuasion.

“In the absence of bankruptcy [legislation], you’re talking about contracts that we cannot abrogate,” he told the Huffington Post. “That’s why bankruptcy was so important.”

Is there any chance Congress will return to it?

“Excuse me, what planet were you on last week? The vote was 45 to 51. Why would you ask that? Do I think there’s a likelihood we could overturn 45-51? No,” said Frank.

“I wish it weren’t the case,” he added. “Maybe there’s some kind of compromise.”

Sen. Dick Durbin (D-Ill.) isn’t confident. “The purpose of the debate last week was to try to create some impetus for the banks to start renegotiating these mortgages in a positive way and the industry fought it,” Durbin, who last week concluded banks “frankly own the place,” told the Huffington Post. “I think many of the banks have not operated in good faith when it comes to this mortgage foreclosure issue.”

Homeowners are the big losers of the banks’ battle against the bill. But real estate agents are now losing real money as commissions fall through, making them a potential lobbying counterweight to the banks.

The National Association of Realtors wants the rules changed: “We are advocating measures that would help streamline the process when using FHA, Fannie or Freddie,” said NAR spokeswoman Mary Trupo in a statement to the Huffington Post. “We are hoping that new process and regulations are put in place.”

Fannie Mae just wrapped up a pilot program to test a process for streamlining short sales by partnering with local listing providers in Arizona and Florida to pre-approve 400 properties for short sales. The government-backed mortgage firm is still evaluating feedback from brokers, but overall the program was a success, and a new short sale initiative is in the works for this year.

“Short sales are one of the tools to avoid foreclosure if all other workout options are exhausted. It’s always in the best interest of the homeowner, the community, and the investor to avoid foreclosure,” said Fannie Mae spokeswoman Amy Bonitatibus in a statement to the Huffington Post.

Liniger says Re/Max recently trained 5,000 employees in short sales.

Lita Smith-Mines, a lawyer who specializes in real estate on Long Island, told the Huffington Post she and her colleagues often see short sales turn into foreclosures because the bank won’t play along - even when losses are as small as $25,000 and the offer is as high as it will get. And much higher, in this market, than the bank will get from a foreclosure auction. The legal costs of foreclosure alone typically run to $50,000.

“There’s no common sense when it comes to lenders. They have their paperwork and if you don’t slot perfectly in, they just say no,” she said.

“A lot was taken on the front end [during the housing boom], but they’re not giving anything back on the back end,” she said. Smith-Mines, though, said she isn’t surprised. “If they actually cared about borrowers, we wouldn’t be in this mess in the first place.”

Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America.

SOURCE

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Elizabeth Warren Asks The Most Obvious Question Ever And Stumps A Bunch Of Bank Regulators

Someone drank too much coffee this morning before a Senate Banking Committee hearing and decided to “do the job we hired her for” and ask the question the rest of us have been “asking for years.” That someone is my new favorite senator, Elizabeth Warren. Someone go on another Starbucks run for her, pretty please?

Watch the video HERE

At 1:20, she asks the question we’ve all been wanting someone to ask FOREVER. Then a government lawyer stumbles over his words.

At 2:20, she rattles off another one. Then a government lawyer stumbles over his words.

At 2:55, she asks another lawyer the same question. Said lawyer then tries to not stumble over her words.

At 3:25, she asks the same question again. That lawyer asks for some time.

At 3:45, she gets our back and goes for the knockout punch.

And then right after that you reward her good behavior by sharing this with everyone on the Internet. You know you want to.

SOURCE

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What Google Knows About You

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Google may know more about you than your mother does. Got a problem with that?

By Robert L. Mitchell
May 11, 2009

“Google KNOWS MORE ABOUT YOU than your mother.”

Kevin Bankston, senior staff attorney at the Electronic Frontier Foundation, recently made that statement to this reporter. A few years ago, it might have sounded far-fetched. But if you’re one of the growing number of PEOPLE WHO ARE USING more and more products in Google’s ever-expanding stable (at last count, I was using a dozen), you might wonder if Bankston isn’t onto something.

It’s easy to understand why privacy advocates and policymakers are sounding alarms about online privacy in general—and singling out Google in particular. If you use Google’s search engine, Google knows what you searched for as well as your activity on partner Web sites that use IT’S AD SERVICES. If you use the CHROME BROWSER, it may know every Web site you’ve typed into the address bar, or “Omnibox.”

It may have all of your e-mail (Gmail), your appointments (Google Calendar) and even your last known location (Google Latitude). It may know what you’re watching (YouTube) and whom you are calling. It may have transcripts of your telephone messages (Google Voice).

It may hold your photos in Picasa Web Albums, which includes face-recognition technology that can automatically identify you and your friends in new photos. And through Google Books, it may know WHAT BOOKS YOU’VE READ, what you annotated and how long you spent reading.

Technically, of course, Google doesn’t know anything about you. But it stores tremendous amounts of data about you and your activities on its servers, from the content you create to the searches you perform, the Web sites you visit and the ads you click.

Google, says Bankston, “is expecting consumers to trust it with the closest thing to a printout of their brain that has ever existed.”

How Google uses personal information is guided by three “bedrock principles,” says Peter Fleischer, the company’s global privacy counsel. “We don’t sell it. We don’t collect it without permission. We don’t use it to serve ads without permission.” But what constitutes “personal information” has not been universally agreed upon.

Google isn’t the only company to follow this business model. “Online tools really aren’t free. We pay for them with micropayments of personal information,” says Greg Conti, a professor at the U.S. Military Academy at West Point and author of the book Googling Security: How Much Does Google Know About You? But Google may have the biggest collection of data about individuals, the content they create and what they do online.

It is the breathtaking scope of data under Google’s control, generated by an expanding list of products and services, that has put the company at the center of the ONLINE PRIVACY DEBATE. According to Pam Dixon, executive director at the World Privacy Forum, “No company has ever had this much consumer data”—an assertion that Google disputes.

Opacity vs. transparency

Critics say Google has been too vague in explaining how it uses the data it collects, how it shares information among its services and with its advertisers, how it protects that data from litigators and government investigators, and how long it retains that data before deleting or “anonymizing” it so that it can’t be tracked back to individual users.

“Because of Google’s opacity as to how it is using that data, and a lack of fundamental information rights [that] users have, [privacy] becomes a very thorny question,” says Dixon.

Privacy policy opacity isn’t limited to Google. It’s so prevalent, in fact, that the Federal Trade Commission warned the industry in February that online businesses will face increased regulation unless they produce PRIVACY STATEMENTS THAT EXPLAIN in a “clear, concise, consumer-friendly and prominent” way what data the companies collect, how they use it and how users can opt out (download PDF).

Google, however, contends that the concerns about opacity and the scope of data it collects are overblown. “I do push back on this notion that what we have is a greater privacy risk to users,” says Mike Yang, product counsel in Google’s legal department. Google, he says, gives users plenty of transparency and control. “There’s this notion that an account has a lot more information than is visible to you, but that tends not to be the case. In most of the products, the information we have about you is visible to you within the service.”

In fact, though, the data Google stores about you falls into two buckets: user-generated content, which you control and which is associated with your account; and server log data, which is associated with one or more browser cookieIDs stored on your computer. Server log data is not visible to you and is not considered to be personally identifiable information.

These logs contain details of how you interact with Google’s various services. They include Web page requests (the date, the time and what was requested), query history, IP address, one or more cookieIDs that uniquely identify your browser, and other metadata. Google declined to provide more detail on its server log architecture, other than to say that the company does not maintain a single, unified set of server logs for all of its services.

Google says it won’t provide visibility into search query logs and other server log data because that data is always associated with a physical computer’s browser or IP address, not the individual or his Google account name. Google contends that opening that data up would create more privacy issues than it would solve. “If we made that transparent, you would be able to see your wife’s searches. It’s always difficult to strike that right balance,” Yang says.

You do have more control than ever before. Google says it removes user-generated content within 14 days for many products, but that period can be longer (it’s 60 days for Gmail). For retention policies that fall “outside of reasonable user expectations or industry practice,” Google says it posts notices either in its privacy policy or in the individual products themselves.

You can control the ads that are served up, either by adding or removing interest categories stored in Google’s Ads Preferences Manager or by opting out of Google’s Doubleclick cookie, which links the data Google has stored about you to your browser in order to deliver targeted advertising. For more information, see “6 ways to protect your privacy on Google.”

Shuman Ghosemajumder, business product manager for trust and safety at Google, says users have nothing to worry about. All of Google’s applications run on separate servers and are not federated in any way. “They exist in individual repositories, except for our raw logs,” he says. But some information is shared in certain circumstances, and Google’s privacy policies are designed to leave the company plenty of wiggle room to innovate.

Yang points to GOOGLE’S HEALTH as an example. If you are exchanging messages with your doctor, you might want those messages to appear in Gmail or have an appointment automatically appear in Google Calendar, he says.

GOOGLE IS HOPING that what it lacks in privacy policy clarity, it can make up for in the transparency of its services.

But Dixon, who follows medical privacy issues, contends that they aren’t transparent enough. Medical records, once transferred to Google Health, aren’t protected by HIPAA or by the rules of doctor-patient confidentiality. Google states that it has no plans to use Google Health for advertising. But by sharing data across services, the company is blurring the lines, Dixon says.

If you have a health problem and you use Google Health, research the disease using Google’s search engine, use Gmail to communicate with your doctor, and link appointment details to Google Calendar, and your last location in Latitude was a medical clinic, Dixon asks, “What does the advertiser get to know about you? What about law enforcement? Or a civil litigant? Where are the facts? I don’t have them, and that bothers me.”

Change in behavior

Google’s recent decision to change gears and mine what it knows about you to better target advertisements has also raised concerns.

Until recently, Google placed ads based on “contextual targeting”—derived from the subject of a search or a keyword in a Gmail message you were reading, for example. To avoid creeping people out with ads targeting sensitive subjects, it avoids the topics of race, religion, sexual orientation, health, political or trade union affiliation, and some sensitive financial categories

With the information at its disposal, Google could pull together in-depth profiles of its users and launch highly targeted ads based on who you are (your user profile) and your activity history on the Web. The latter is a controversial practice known as behavioral advertising. Until recently, Google rejected the technique.

Then, on March 11, Susan Wojcicki, vice president of product management, announced in a post on Google’s official blog that the company was taking a step in that direction. With the launch of “interest-based advertising,” Google is beginning to target ads based not just on context but on the Web pages you previously viewed.

That Web page history will come from a log associated with the cookieID. However, since that ID links not to a unique user but to a unique browser, you may end up viewing ads for Web pages visited by your spouse or others who share your machine. In a bizarre Catch-22, advertisers will be able to target ads at you based on logs that Google says it cannot make available to you—for privacy reasons.

Ghosemajumder acknowledges that the situation isn’t perfect. “In some cases there is [transparency], and in some cases there isn’t,” he admits. But he says Google is “trying to come up with more ways to offer transparency.”

Privacy advocates fear that interest-based advertising is just the first step toward more highly targeted advertising that draws upon everything Google knows about you. “This is a major issue, because Google has been collecting all of this information over time about people and they said they would not be using that data,” says Nicole Ozer, technology and civil liberties policy director at ACLU of Northern California.

But privacy advocates say Google is also doing some things right, such as launching its online Privacy Center and providing additional controls for some of its services.

Google is not acting alone in moving toward behavioral advertising. It is simply joining many other companies that are pursuing this practice. Mike Zaneis, vice president of public policy at the Internet Advertising Bureau, acknowledges that highly targeted advertising can be creepy. But, he says, “creepiness is not in and of itself a consumer harm.”

The practice is unlikely to change unless users respond by abandoning services that use the techniques. But he argues that they won’t because highly targeted ads are of more interest to users than nontargeted “spam ads.”

Concerns have also been raised about Google’s ability to secure user content internally. Google has had a few small incidents, such as when it allowed some Google Docs users’ documents to be shared with users who did not have permission to view them. But that incident, which affected less than 1% of users, pales in comparison to security fiascoes at Google’s competitors, such as AOL’s release of search log data from 650,000 users in 2006.

Shuman Ghosemajumder, business product manager for trust and safety, Google says the privacy of user data is tightly controlled. “We have all kinds of measures to ensure that third parties can’t get access to users’ private data, and we have internal controls to ensure that you can’t get access to data in a given Google service if you’re not part of the team,” he says.
How anonymous?

Bowing to pressure, Google has made other concessions as well.

Google doesn’t delete server log data, but it has agreed to anonymize it after a period of time so that the logs can’t be associated with a specific cookieID or IP address. After initially agreeing in 2007 to anonymize users’ IP addresses and other data in its server logs after 18 months, it announced last September that it was shortening that period to nine months for all data except for cookies, which will still be anonymized after 18 months. “All of our services are subject to those anonymization policies,” says Ghosemajumder.

Critics complain that Google doesn’t go far enough in how it anonymizes personally identifiable data. For example, Google zeroes out the last 8 bits of the 32-bit IP address. That narrows your identity down to a group of 256 machines in a specific geographic area. Companies with their own block of IP addresses also may be concerned about this scheme, since activity can easily be associated with the organization’s identity, if not with an individual. Even anonymized data can be personally identifiable when combined with other data, privacy advocates say.

Sensing an opportunity, and facing similar criticisms, competitors have tried to go Google one better. Rather than anonymizing IP addresses, Microsoft deletes them after 18 months and has proposed that the industry anonymize all search logs after six months. Yahoo anonymizes search queries and other log data after three months, and the Ixquick search engine doesn’t store users’ IP addresses at all.

Perhaps the biggest concern for privacy advocates is how the treasure trove of data Google has about you might end up in the wrong hands. It is, says Bankston, a wealth of detailed, sensitive information that provides “one-stop shopping for government investigators, litigators and others who want to know what you’ve been doing.”

Privacy laws provide little protection in this regard. Most policies—including Google’s—don’t provide an explicit guarantee that the company will notify you if your data has been requested through a court order or subpoena. “The legal protections accorded to data stored with companies [and] the data they collect about you is very unclear,” says Bankston.

The industry still relies on the Electronic Communications Privacy Act of 1986, a 22-year-old privacy law that even the government has argued doesn’t apply to online data. “Google has yet to state a specific position on whether and how that law protects your search logs,” Bankston says.

Privacy groups want Google to reveal just how many requests it receives from litigators and law enforcement and how it responds to those requests, but the company, like its competitors, does not release that information.

Google declined to elaborate on why it’s not more forthcoming in this regard, but deputy general counsel Nicole Wong did say that it complies with legal requests “narrowly, appropriately and in accordance with the law.”

In at least one high-profile case, Google has taken strong measures to protect the privacy of its subscribers. When Viacom issued a subpoena for the viewing records of Google’s YouTube subscribers, it fought the subpoena and turned over only anonymized data that it says can’t be traced back to individual users.

But privacy watchers question what happens to the thousands of requests for individual records in less prominent cases. Google’s response: “Our overarching principle is we want to notify users,” says product counsel Mike Yang.

The ACLU’s Ozer thinks Google should collect less data and store it for shorter periods of time. That’s one of her suggestions in a 44-page privacy and business primer for Web 2.0 companies published by ACLU of Northern California.

With lawmakers focused on the economy, privacy groups say it’s unlikely that laws will change anytime soon. But they—and regulators—are pressuring Google to provide leadership and set the example. “For a company with so much data, they have a responsibility to be innovative, proactive and pro-consumer in the area of privacy,” Dixon argues.

Parting with a certain amount of personal information is part of the bargain you strike when you sign up for free Web-based software and services. “People should have visibility into what information is being collected and how it will be used, and they should get to choose what they share and control who can access it,” says Fleischer.

But the tension between your desire for privacy and Google’s need for flexibility in handling your data is likely to be an ongoing dance. “Google’s business is to make money from the information it gathers from its users. It will always be a give-and-take,” says Bankston.

Eventually, updated privacy laws—and the choices users make—will delineate what is acceptable and what is not. “Our business model depends completely on user trust,” says Yang. Part of Google’s challenge is to build that trust without severely restricting the business’s ability to innovate.

Google has done a good job on the trust side, Bankston says. He just wants to see it give users more transparency and control. “We don’t want Google to stop innovating,” he says. “We just want the law to keep up so that this data is safe.”

SOURCE

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Googles for-profit surveillance problem

By Yasha Levine
Pando
December 16, 2013

Early last week, some of the biggest names in Silicon Valley announced that they had gotten together to form a new forward-thinking organization dedicated to promoting GOVERNMENT SURVEILLANCE REFORM in the name of “free expression” and “privacy.”

The charade should have been laughed at and mocked - after all, these same companies feed on privacy for profit, and unfettered surveillance is their stock and trade. Instead, it was met with cheers and fanfare from reporters and privacy and tech experts alike. “Finally!” people cried, Silicon Valley has grown up and matured enough to help society tackle the biggest problem of our age: the runaway power of the modern surveillance state.

The Guardian DESCRIBED the tech companies plan as “radical, and predicted” it would end many of the current programs through which governments spy on citizens at home and abroad. Laura W. Murphy, Director of ACLU’s DC Legislative Office, published an impassioned blog post praising tech giants for urging President Barack Obama and Congress to enact comprehensive reform of government surveillance. Silicon Valley booster Jeff Jarvis could hardly CONTAIN HIS GLEE. “Bravo,” he yelped. “The companies came down at last on the side of citizens over spies.” And then added:

“Spying is bad for the internet; whats bad for the internet is bad for Silicon Valley; and - to reverse the old General Motors saw- what’s bad for Silicon Valley is bad for America.

But while leading tech and privacy experts like Jarvis slobber over Silicon Valley megacorps and praise their heroic stand against oppressive government surveillance, most still dont seem to mind that these same tech billionaires run vast private sector surveillance operations of their own: hi-tech spying operations that vacuum up private information and use it to compile detailed dossiers on hundreds of millions of people around the world - and thats on top of their work colluding and contracting with government intelligence agencies.

If you step back and look at the BIGGER PICTURE, it’s not hard to see that Silicon Valley runs on for-profit surveillance, and that it dwarfs anything being run by the NSA.

Last week, I wrote about Google’s Street View program, and how after a series of investigations in the US and Europe, we learned that Google had used its Street View cars to carry out a covert - and certainly illegal espionage operation on a global scale, siphoning loads of personally identifiable data from peopleגs Wi-Fi connections all across the world. Emails, medical records, love notes, passwords, the whole works anything that wasnגt encrypted was fair game. It was all part of the original program design: Google had equipped its Street View cars with surveillance gear designed to intercept and vacuum up all the wireless network communication data that crossed their path. An FCC investigation showing that the company knowingly deployed Street Views surveillance program, and then had analyzed and integrated the data that it had intercepted.

Most disturbingly, when its Street View surveillance program was uncovered by regulators, Google pulled every crisis management trick in the book to confuse investors, dodge questions, avoid scrutiny, and prevent the public from finding out the truth. The companyҒs behavior got so bad that the FCC fined it for obstruction of justice.

The investigation in Street View uncovered a dark side to Google. But as alarming as it was, Googles Street View wiretapping scheme was just a tiny experimental program compared Google’s bread and butter: a massive surveillance operation that intercepts and analyzes terabytes of global Internet traffic every day, and then uses that data to build and update complex psychological profiles on hundreds of millions of people all over the world all of it in real time. Youגve heard about this program. You probably interact with it every day. You call it Gmail.

Google launched Gmail in 2004. It was the companys first major ғlog in service and was aimed at poaching email users from Microsoft and Yahoo. To do that, Google offered one gigabyte of free storage space standard with every account. It was an insane amount of data at the time - at least several hundred times more space than what was being offered by Yahoo or Hotmail and people signed up en masse. At one point, Gmailגs limited pre-public release invites were so desirable that at one point they fetched over $150 on eBay.

To TECH REPORTERS Gmail’s free email service was nothing short of revolutionary. New York Times tech columnist David Pogue wrote: “One gigabyte changes everything.” You no longer live in terror that somebody will send you a photo, thereby exceeding your two-megabyte limit and making all subsequent messages bounce back to their senders.

And what about the fact that Gmail scanned your email correspondence to deliver targeted ads?

Well, what of it?

Gmail users handed over all their personal correspondence to Google, giving the company to right to scan, analyze, and retain in perpetuity their correspondence in return for a gigabyte of gigabyte of storage, which even at that early stage already cost Google only $2 PER GIGABYTE per year.

Selling the contents of our private and business life to a for-profit corporation in return for half a Big Mac a year? What a steal!

You’d be hard pressed to find a bum whod sell out to Google that cheap. But most mainstream tech journalist weren’t that scrupulous, and lined up to boost Gmail to the public.

The only population likely not to be delighted by Gmail are those still uncomfortable with those computer-generated ads. Those people are free to ignore or even bad-mouth Gmail, but they shouldn’t try to stop Google from offering Gmail to the rest of us. We know a good thing when we see it, wrote Pogue in 2004.

But not everyone was as excited as Mr. Pogue.

Several privacy groups, including the Electronic Privacy Information Center, were alarmed by Gmail’s vast potential for privacy abuse. In particular, EPIC was concerned that Google was not restricting its email scanning activities solely to its registered user base, but was intercepting and analyzing the private communication of anyone who emailed with a Gmail user:

“Gmail violates the privacy rights of non-subscribers. Non-subscribers who e-mail a Gmail user have content extraction performed on their e-mail even though they have not consented to have their communications monitored, nor may they even be aware that their communications are being analyzed, EPIC explained at the time. The organization pointed out that this practice almost certainly violates California wiretapping statues which expressly criminalizes the interception of electronic communication without consent of all parties involved.

What spooked EPIC even more: Google was not simply scanning peopleԗs emails for advertising keywords, but had developed underlying technology to compile sophisticated dossiers of everyone who came through its email system. All communication was subject to deep linguistic analysis; conversations were parsed for keywords, meaning and even tone; individuals were matched to real identities using contact information stored in a users Gmail address book; attached documents were scraped for intel - that info was then cross-referenced with previous email interactions and combined with stuff gleamed from other Google services, as well as third-party sources

Here’s are some of the things that Google would use to construct its profiles, gleamed from two patents company filed prior to launching its Gmail service:

Concepts and topics discussed in email, as well as email attachments
The content of websites that users have visited
Demographic information including income, sex, race, marital status
Geographic information
Psychographic information җ personality type, values, attitudes, interests and lifestyle interests
Previous searches users have made
Information about documents a user viewed and or edited by the users
Browsing activity
Previous purchases

To EPIC, Google’s interception and use of such detailed personal information was clearly violation of California law, and the organization called on California’s Attorney General promised to INVESTIGATE GOOGLE’S GMAIL SERVICE. The Attorney General promise to look into the matter, but nothing much happened.

Meanwhile, Gmail’s user base continued to rocket. As of this month, there are something like 425 million active users around the world using email services. Individuals, schools, universities, companies, government employees, non-profits and it’s not just Gmail anymore.

After its runaway success with Gmail, Google aggressively expanded its online presence, buying up smaller tech companies and deploying a staggering number of services and apps. In just a few years, Google had suddenly become ubiquitous, inserting themselves into almost every aspect of our lives: We search through Google, BROWSE the Web through Google, writein Google, store our files in Google and use Google to drive and take public transport. Hell, even our mobile PHONES run on Google.

All these services might appear disparate and unconnected. To the uninitiated, Google’s offering of free services - from email, to amazing mobile maps, to a powerful replacement for Microsoft Office - might seem like charity. Why give away this stuff for free? But to think that way is to miss the fundamental purpose that Google serves and why it can generate nearly $20 billion in profits a year.

The Google services and apps that we interact with on a daily basis arenחt the companys main product: They are the harvesting machines that dig up and process the stuff that Google really sells: for-profit intelligence.

Google is’t a traditional Internet service company. It isn;t even an advertising company. Google is a whole new type of beast: a global advertising-intelligence company that tries to funnel as much user activity in the real and online world through its services in order to track, analyze and profile us: it tracks as much of our daily lives as possible - who we are, what we do, what we like, where we go, who we talk to, what we think about, what were interested in - all those things are seized, packaged, commodified and sold on the market at this point, most of the business comes from matching the right ad to the right eyeballs. But who knows how the massive database Google’s compiling on all of us will be used in the future.

No wonder that when Google first rolled out Gmail in 2004, cofounder Larry Page refused to rule out that the company would never combine peoples search and browsing history with their Gmail account profiles: גIt might be really useful for us to know that information. “I’d hate to rule anything like that out.” Indeed it was. Profitable, too.

It’s been almost a decade since Google launched its Gmail service, but the fundamental questions about the legality of the company’s surveillance operations first posed by EPIC have not been resolved.

Indeed, a class action lawsuit currently WNDING its way through California federal court system shows that weve not moved an inch.

The complaint - a consolidation of six separate class action lawsuits that had been filed against Google in California, Florida, Illinois, Maryland and Pennsylvania accuses Google of illegally intercepting, reading and profiting off people’s private correspondence without compensation. The lawsuit directly challenges Googles legal right to indiscriminately vacuum up people’s data without clear consent, and just might be the biggest threat Google has ever faced.

Heres how the New York Times described the case:

Wiretapping is typically the stuff of spy dramas and shady criminal escapades. But now, one of the worldҒs biggest Web companies, Google, must defend itself against accusations that it is illegally wiretapping in the course of its everyday business gathering data about Internet users and showing them related ads.

ҒThe Gmail case involves Googles practice of automatically scanning e-mail messages and showing ads based on the contents of the e-mails. The plaintiffs include voluntary Gmail users, people who have to use Gmail as part of an educational institution and non-Gmail users whose messages were received by a Gmail user. They say the scanning of the messages violates state and federal antiwiretapping laws.

Google has aggressively fought the lawsuit. It first convinced a judge to put it under seal - which redacted most of the complaint and made it unavailable to public scrutiny - and then made a series of disingenuous arguments in an attempt to get the get the lawsuit preemptively dismissed. Google’s attorneys didn’t dispute its for-profit surveillance activities. What they claimed was that intercepting and analyzing electronic communication, and using that information to build sophisticated psychological profiles, was no different than scanning emails for viruses or spam. And then they made a stunning admission, arguing that as far as Google saw it, people who used Internet services for communication had “no legitimate expectation of privacy” and thus anyone who emailed with Gmail users had given implied consent - for Google to intercept and analyze their email exchange.

No expectation of privacy? Implied consent for surveillance?

Google’s claims were transparently disingenuous, and Judge Lucy Koh rejected them out of hand and allowed the lawsuit to proceed.

Unfortunately, it’s difficult to comment on or analyze the contents of the class action lawsuit filed against Google, as the company redacted just about all of it. One thing is clear: the complaint goes beyond simple wiretapping and brings into question an even bigger concern: Who owns the digital personal information about our lives our thoughts, ideas, interactions, personal secrets, preferences, desires and hopes? And can all these things be seized bit by bit, analyzed, packaged, commodified and then bought and sold on the market like any other good? Can Google do that? What rights do we have over our inner lives? It’s scary and crazy. Especially when you think kids born today: Their entire lives will be digitally surveilled, recorded, analyzed, stored somewhere and then passed around from company to company. What happens to that information?

What happens to all this data in the future should be of serious concern. Not only because, with the right warrant (or in many cases without) the data is available to law enforcement. But also because in the unregulated hands of Google, our aggregated psychological profiles are an extremely valuable asset that could end us used for almost anything.

EPIC points out that Google reservers the right to transfer all of the information, including any profiles created, “if and when it is merged or sold” How do we know that information wont end up in some private background check database that’ll be available to your boss? How do we know this information wont be hacked or stolen and won’t fall into the hands of scammers and repressive dictators?

The answer is: We don’t. And these tech companies would rather keep us in the dark and not caring.

Googl’s corporate leadership understands that increased privacy regulations could torpedo its entire business model and the company takes quite a lot of space on its SEC filing disclosing the dangers to its investors:

Privacy concerns relating to elements of our technology could damage our reputation and deter current and potential users from using our products and services

We also face risks from legislation that could be passed in the future. For example, there is a risk that state legislatures will attempt to regulate the automated scanning of email messages in ways that interfere with our Gmail free advertising-supported web mail service. Any such legislation could make it more difficult for us to operate or could prohibit the aspects of our Gmail service that uses computers to match advertisements to the content of a userҒs email message when email messages are viewed using the service. This could prevent us from implementing the Gmail service in any affected states and impair our ability to compete in the email services market

Former Google CEO Eric Schmidt has not been shy about his company’s views on Internet privacy: People don’t have any, nor should they expect it. “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place,” he infamously told CNBC in 2009. And he’s right. Because true Internet privacy and real surveillance reform would be the end of Google.

And not just Google, but nearly every major consumer Silicon Valley company all of them feed peopleҒs personal data one way or another and depend on for-profit surveillance for survival.

Which brings me to Silicon Valleys “Reform Government Surveillance” project.

The fact that the biggest, most data-hungry companies in Silicon Valley joined up in a cynical effort to shift attention away from their own for-profit surveillance operations and blame it all on big bad government is to be expected. What’s surprising is just how many supposed journalists and so-called privacy advocates fell for it.

SOURCE

Posted by Elvis on 05/12/09 •
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