Megan McArdle, who is usually a more careful reader, and Glenn Reynolds, who usually isn't, both accuse me of urging the prosecution of the wingnuts who have been submitting false-name contributions on the Obama website, and criticize me for trying to use the power of law enforcement to suppress criticism the people I support politically.
Just one thing: Nowhere in the post they refer to (reproduced in full after the jump) do I say a syllable about prosecution. I merely point out that the activity violates the law, which means that people doing it shouldn't crow quite so loudly. Of course no actual investigator or prosecutor would waste his time working on a case involving a $5 contribution to Obama in the name of "Mickey Mouse." Neither Megan, who isn't a lawyer, nor Glenn, who is, bothers to offer any reason why the activity in question, which both of them have publicized and praised, doesn't constitute wire fraud as defined in the statute.
I am happy to say that I was incorrect, but this seems to me like a distinction without a difference. When your candidate is caught violating basic financial prosecuting standards, standards which should, if anything, be stricter for politicians, the correct response is not to point out that uncovering this problem involved technically committed a crime. The correct response is "This is terrible. What is the campaign going to do to fix this?"
All the information that I have gathered indicates that this couldn't simply have happened by accident; you have to systematically uncheck all the security guards that prevent address verification. I don't read the sinister signs into this that others do--having worked in technology, I can easily imagine half-a-dozen scenarios in which a lazy tech overrode the security rather than actually fix some annoying bug. Nonetheless. Whoever is responsible should be fired.
Testing for holes in the system is fraud in the sense that undercover journalists who falsify their resumes commit fraud: a technical violation that society actively encourages, because it helps us uncover things that are wrong. If it is possible to commit fraud on Obama's website, then a citizen who uncovers this should be applauded, not least by the Obama campaign, which at least putatively does not want to violate campaign finance standards, nor make it easy for criminals to misuse someone's credit card.
As this story from the National Journal makes clear, the candidate that Professor Kleiman and I both support seems to have systematically weaker protections against fraud than McCain. That is worrying. In the end, I don't think it has made much difference; Obama isn't winning because of his massive pocketbook, but because the Republicans got caught in bed with a naked financial crisis. But the principle is rather important.
And while I'm no lawyer, I'm not sure you could argue that those people did commit fraud. The crime is not really the individual transaction; it's setting up the system to enable fraudulent transactions. And no one made the Obama campaign do that.
"This is terrible. What is the campaign going to do to fix this?"
uh.....if I've been paying attention, the campaign is planning to celebrate his election, and then raise the taxes on the top 5% of wage earners.....which means they're planning on raising your taxes, MM.
Fraud requires reliance by the other party to its legal detriment. If I tell you my house is termite free when it's not, I'm a liar, but not guilty of fraud. If you then buy it believing me, then that's fraud. But if you independently discover the termites, but buy it anyway, that's not fraud because there is no reliance (although it might be attempted fraud, or covered by disclosure laws, etc).
If I tell you I'm Napoleon while handing you $10, that's simply not fraud.
Oh, please. Does fascist thug Mark Kleiman not understand the word "imply"?
If a Klansman makes a speech to a bunch of racists about how awful black people are, and then mentions the address of a black person, but DOESN'T say "you ought to go over to that address and lynch the people who live there", that doesn't mean that what the Klansman had nothing to do with the lynching. All it means is that he implied that the crowd ought to commit the lynching, and the crowd got the message.
No different for Kleiman. Anybody with an IQ over 50 understand exactly what he was saying, even if he didn't use the words.
I'm not sure it was fraud. The National Journal article said what they did was buy a prepaid Amex and use it to make donations online to both campaigns. The McCain campaign kicked it because it couldn't verify a billing address (because it's a prepaid card) while the Obama campaign evidently didn't check if they matched.
Assuming that neither donation exceeded limits or was from someone not eligible to donate, they wouldn't be fraudulent. They are just demonstrating a means that someone who is over the limit or not a citizen could fraudulently donate.
Does anyone know if the campaigns keep track of donations via credit card to make sure the same credit card doesn't give over the maximum allowed for an individual? This would be one motive (and an unsurprising one) for deliberately disabling the security features.
Assuming that neither donation exceeded limits or was from someone not eligible to donate, they wouldn't be fraudulent.
Even assuming such donations are illegal under campaign finance laws, that doesn't make them wire fraud. Who is being defrauded, in the event that the donor really does own the cards, really intends for the campaign to get the money, and really pays the bill at the end of the month?
Maybe Mark Kleiman can offer one of these "legal arguments" he seems so fond of.
I don't read the sinister signs into this that others do
Don't, or refuse to in the face of all the facts? In this particular instance, Megan, it appears as though you're actively refusing to listen to the facts, as it would genuinely force you to rethink your entrenched position as a Barack Obama supporter.
From the last post, and I imagine continuing into this one, there are plenty of people (including myself) who have worked in this area for a living and have given ample evidence as to why this is not a mistake or some kind of 'bug' from some lazy developer.
It's actually quite scary how sycophantic many Obama supporters are.
It's not fraud - it is a breach of electoral finance laws by various donors (foreigners and Americans going over the limit). This breach is facilitated by the Obama campaign, in part by disabling the tools that are commonly used to prevent CC fraud. As I wrote earlier, on a very cursory reading, I don't think the Obama campaign broke the law (I don't think even a tacit understanding like this can be conspiracy, but I'd like to be wrong), but they put in place the tools and conditions to allow others to break the law and to make sure that there was little chance of the illegality being discovered later - and unless an illegality is discovered, they don't have to give back the money. As long as they do give back the money when and if it is discovered to be improper (unlikely with poor or no records), then the campaign isn't really in trouble, since you don't want to have a situation where a McCain supporter makes donations to Obama just to get them in trouble, or vice versa.
There is basically a loophole in the law that says donations under $200 don't have to be reported - that's just dumb. McCain and Hillary each track those smaller donations out of a sense of caution and self-serving pragmatism (McCain because he is Mr Campaign Finance Goodey-2-Shoes, Hillary because of past Clinton fundraising scandals). Obama is (I think) obeying the letter of the law while working to undermine and corrupt its spirit, and to help others break the law.
I hope that this was not the change we were waiting for?
This WaPo story about Obama's fundraising was linked to without comment by Instapundit. It seems like a small percentage of contributions. I agree they should be more aggressive, but it seems they're making an effort to deal with problematic contributions:
Very sinister! Heh. Indeedy!
In the end, I don't think it has made much difference; Obama isn't winning because of his massive pocketbook
He's outspending McCain on advertising 4 - 1 in many battleground states. You really think that isn't having an effect?
Really?
Graeme,
Nice try, no dice. Obama's campaign is catching a small number of fraudulent donations (which is to say, people are calling in and complaining).
They are deliberately, as a matter of policy, and at some cost to themselves (the bank takes a bigger cut when you turn off AVS) making it impossible to catch much larger amounts of fraud.
The had 632,000 new donors in September. How many of them do you think they validated?
Now, they could release their donor database (they throw out the credit card numbers attached to each transaction, so a lot of the fraud, at this point, would be impossible to quickly catch). If they did that, how many donors names lkjh do you think we'd find?
...the Republicans got caught in bed with a naked Financial crisis....Brilliant!!!
Now I understand why the WaPo wrote the whitewash it did. Obama, his supporters, and by extension the MSM, can all point to the article and say "See, it's only 1% of the contributions at most and besides the Obama campaign says its catches this stuff on the backend."
Of course, the 1% is a completely arbitrary and unsourced number - in fact close to 50% of Obama's fudns have come form donations under $200. And the claim by the Obama campaign that these things are caught on the back-end is a joke...we already have seen numerous FEC violating card transactions hit accounts...in other words, the charges are going through.
Obama, release your donation records! What do you have to hide???
So when a 20 million dollar donation comes in from Rezko's Iranian friend not to worry right.
Re: All the information that I have gathered indicates that this couldn't simply have happened by accident; you have to systematically uncheck all the security guards that prevent address verification.
And once again I have to ask: are we claiming that the banks are conspiring to help Obama in this matter? Or that Obama has had hackers infiltrate the banks and turn off their security?
It's the banks who verify this data, because it's the banks who have access to the cardholders' address info independent of what is submitted with the transaction-- the entity submitting the request for payment has only what the payer has given them. Or is someone suggesting that the Obama campaign, and everyone else who accepts online payment, should employ a small army of people to google "Joe Blow" and see if he really does live at "666 Dumbass Lane"?
are we claiming that the banks are conspiring to help Obama in this matter?
We're claiming that whatever the banks are doing, the Obama campaign is forwarding charges to them with obviously fake names, but the McCain campaign is not.
JonF, no offense, but you don't know jack about how card authorization works. But for starters, try to understand that this is a unique case where the card owner is actually complicit in the fraud. As a motivaterd Obama supporter, I can hit my own card for $199 twenty times over so long as I give a different address. I'm not going to complain to my card company because this is what I intended...
Obama's campaign has made it as easy as possible for contributors to break the $200 limit and donate even from a foreign location. DELIBERATELY.
Nobody would need to hire an "army" of people to Google contributors if the Obama campaign bothered to turn on basic card fraud filters and algorithms.
If it costs the Obama campaign money to reverse a fraudulent donation, that's a "legal injury."
A while back, I set up a web payment process for a client and they did not want address validation. Why? Because there was a charge for address verification and they deemed it unlikely that someone would want to pay a bill with a stolen credit card.
If it costs the Obama campaign money to reverse a fraudulent donation, that's a "legal injury."
Assuming they don't make more than that cost in the float, and assuming you can prove that the intent of the fake donor was to cost the campaign money.
Furthermore, if the fake donor is legitimately allowed to make contributions, then the campaign will not be required to return the money. That means that US citizens making test donations to check Obama's security aren't causing a legal injury, and therefore are not committing fraud, as Kleiman has repeatedly claimed.
I've done CC authorization stuff for years - the Address Verification Service (AVS) that is done over the internet is by default and encouraged to be as strict as possible. With card-not-present (all phone and internet) transactions the vendor, in this case Obama, is 100% liable for all fraud. This places all of the record keeping and risk burden on the vendor.
Obama could simply have not turned off the zip matching, or flagged those for review before processing, and prevented a whole host of issues. This proves we need to require more reporting requirements and record keeping on ALL donations.
Obama has proven that you can't trust a politician to do even the right thing when they don't need to do the wrong thing. He's violated the fundraising laws intent if not letter and done so when his opponent was limited to less than 1 month of his fund raising totals.
Obama: the hope, campaign finance violations, staffer vote fraud, political intimidation, lapdog media and change we deserve.
RobZ, unless your client is accepting micro-payments or selling only small ticket goods, they are STUPID. No online merchant in their right mind would turn off fraud checks! You seem to be rather casual about your client's decision...that's a rather strange attitude coming from an e-commerce pro.
What makes this Obama case so unique is that the merchant and buyer are complicit in a conspiracy to commit fraud. Usually, it's the buyer trying to ripoff the merchant.
All the information that I have gathered indicates that this couldn't simply have happened by accident; you have to systematically uncheck all the security guards that prevent address verification. I don't read the sinister signs into this that others do--having worked in technology, I can easily imagine half-a-dozen scenarios in which a lazy tech overrode the security rather than actually fix some annoying bug. Nonetheless. Whoever is responsible should be fired.
Megan, this is rendered increasingly unlikely by the length of time that it has continued to be possible, and even more unlikely by the fact that when it was first revealed, the address checks were re-instituted for a short time and then removed again.
Is it possible, by Heinlein's Razor, this believe it's stupidity instead of actual purposeful malice? Yeah, I suppose.
But speaking as a computer security professional, I'd have to say it ain't easy.
Cheeze. Megan sometimes engages in intellectual honesty. Kleiman didn't advocate prosecuting the Citizen Journalists,, he asserted a simple, obvious truth. I think this reads like going the long way around the block to avoid simply admitting she was wrong.
Mike:
I offered up the verification to them. They declined. When I reflected upon it, I decided they probably knew what they were doing. Only a moron would use a stolen credit card to pay a monthly bill tied to their residence.
Criminals generally expect to get something from their frauds. How would a holder of a stolen number benefit from using it to make a donation?
I am happy to say that I was incorrect, but this seems to me like a distinction without a difference.
Nice try, Jonah...er...Megan, but the real lesson here is that you--yet again--need to stop and think before you post something out of your...er...off the top of your head. (It should go without saying that, as with the unsubstituted post on hoaxes, Megan's opinion reflexively tilted Republican--yet again.)
Is there anything else which you're happy to admit you were incorrect about?
Um, the post is basically right, but not this last part:
And while I'm no lawyer, I'm not sure you could argue that those people did commit fraud. The crime is not really the individual transaction; it's setting up the system to enable fraudulent transactions. And no one made the Obama campaign do that.
If I leave my front door open, it's still you who commit the crime when you steal my TV. Or more aptly, if I open a strip bar in an area that's zoned against strip bars, both I and the strippers are committing crimes.
Mike - go easy - JonF is not a bad guy here.
rob - interesting, I guess that makes sense, since it is pretty traceable. In the Obama case, I'm sure there is also some fraudulent use of stolen cards or numbers, but I'd imagine it is pretty minimal, and if it happens i'm sure the reverse the charge.
Our concern is not some punk with a stolen card - I'm concerned about some upper middle class moveon type with a fist full of cards and some time to kill - easy to make hundres of $199 donations in a few hours.
Megan, you're crazy.
It's somehow obama's fault that wingnuts chose to break the law? What?
Thats a reach.
and its a prime example of why i stopped reading your blog. You're just batshit crazy.
I only stopped by to leave this comment cause mark kleinman said you were being crazy (which didn't surprise me at all) but whatever....
What's the payoff for the fist-full-of-cards guy?
RobZ,
Illegal campaign contributions without a trace
Obama gets to run more ads, buy 30 minute blocks of TV
Illegal, unfair, corrupting influence on the campaign
Are you actually askling that question?
If so, why have any regulations at all?
Dear Megan,
This message is going to be a bit technical, but if you're going to talk about these things shouldn't you know the facts?
I'm using authorize.net as my example because they're the most popular payment gateway. Here's their AVS (address verification service) documentation:
http://www.authorize.net/support/CNP/helpfiles/Account/Settings/Security_Settings/Fraud_Settings/Address_Verification_System_(AVS).htm
1. The only 2 pieces of information that get used in AVS are address line 1 and zip code. It is simply not possible under any circumstances to verify a credit card against a person's name at transaction time.
2. On the configuration page of an account each of those letters (BEGRSUYAWZN) has a checkbox next to it. To configure your account you simply check the boxes that you want to enable.
3. The purpose of checking any of the boxes is to minimize chargebacks so that you pay a lower transaction cost. A chargeback is when someone calls their credit card company and says they don't want to pay for the charge. In some businesses, like adult online services, this is a huge problem. In other situations, like collecting political donations, it's most likely a non-existant problem. *If you don't care about chargebacks there is no reason to check any of the boxes.*
4. It is against credit card security compliance rules to store credit card numbers. So there is no way, at transaction time, to check whether a given credit card number has been used above a certain dollar amount. That can only happen off line and after the fact.
5. In short, any auditing of credit card transactions to verify that they follow campaign finance laws can only happen at some point *after* the transactions have happened and the records can be analyzed. Let me emphasize that with all caps: IT IS TECHNICALLY IMPOSSIBLE TO VERIFY CREDIT CARD TRANSACTIONS AT TRANSACTION TIME FOR THE PURPOSES OF CAMPAIGN FINANCE LAWS.
Here's what you said:
"it should not be possible to charge something to a credit card without matching the name to the name on the credit card"
As stated above the "name on the credit card" does not exist anywhere in the payment system. What you think should not be possible is not only possible, it's mandatory.
"All the information that I have gathered indicates that this couldn't simply have happened by accident; you have to systematically uncheck all the security guards that prevent address verification. I don't read the sinister signs into this that others do--having worked in technology, I can easily imagine half-a-dozen scenarios in which a lazy tech overrode the security rather than actually fix some annoying bug."
I'm glad you don't read any sinister signs into this. But you're still using wingnut language. What kind of system do you need to systematically click a checkbox on a webpage? This has nothing to do with software or bugs and there's no security to "override." There's only a preferences web page with some boxes that you can check to minimize your chances of getting chargebacks.
"All the information I have gathered..." Please don't be a wingnut. Reading that paragraph made me sad, for real. If you need a source for accurate internet technology information in the future feel free to email me. Peddling ignorance is very unbecoming.
brooksfoe,
What crime have otherwise legitimate donors using their own credit cards but fake names committed?
Megan:
From what I remember, you did a bloggingheads episode with Kleiman. I don't think you gelled very well with him.
David Mathers - Well, somehow the McCain and Clinton campaigns manage to keep the names, and not "Good Will". Tracking by credit card number isn't helpful anyway - I have at least 6 I could use, so that's $13,800. Anyway, if you at least have the verification of address turned on (which Obama didn't) then donors have to use their real addresses to donate, which addresses can later be compared in an audit - if there are 36 people all donating from an address that is a 2 bedroom rancher, then you have a problem. Also, while not perfect, if people have to use real addresses, they are a little more likely to use real names.
What the Obama folks have done is make it possible to enter the crap info for addresses so checking the records later will be harder. You are right, not all electoral law violations can be stopped at the online donation stage, but Obama is making it so that the necessary information is not recorded, so it is very hard to check later either, since you'd be relying on a garbage paper trail.
Anyway, don't tell me he couldn't set it so that foreign credit cards wouldn't just breeze through?
"brooksfoe,
What crime have otherwise legitimate donors using their own credit cards but fake names committed?"
Um, what is violating election finance law by exceeding the maximum limit per person? How about donations by non-US citizens?
I thought that Dems were supposed to be smart - for such geniuses you folks sure are slow on the uptake - it's almost like you don't want to understand . . .
Holdfast -
Option G is "The credit card issuing bank is of non-U.S. origin and does not support AVS checks"
It's fairly common for international cards to not support AVS. So if you enable G you'll reject all those transactions, most of which are legitimate. None of the merchants I work with has G enabled.
Um, what is violating election finance law by exceeding the maximum limit per person? How about donations by non-US citizens?
Yes, well, the people you mention would not qualify as "otherwise legitimate," now would they?
I suspect that there is probably a law requiring you to use your real name for disclosure purposes, but if anonymous donations under $200 are allowed, I'm not sure that a psudeonymous donation would be illegal.
My point, repeated often, is that contributing $5 under a fake name, provided you own the card and don't intend to dispute the charge, is probably not illegal, and definitely not fraud. So Kleiman is wrong.
It is not as transparent as I would like, but it's hardly traceless. The credit card companies have a record of every campaign contribution made using the cards they issued and they know very well who the card holders are. If some prosecutor gets a bee in his or her bonnet, is it all not subject to discovery?
Why don't these guys just give their money to Move On or some other liberal 527? It'd be entirely legal, a hell of a lot easier and have pretty much the same effect.
After due consideration, I don't see how there is any significant possibility of something like ten thousand guys evading the limits, each giving Obama twenty thousand dollars, all receiving nothing more than satisfaction of knowing that they've enabled Obama to run more ads.
I didn't say I didn't think it couldn't be more transparent. But I don't think it sounds like there's been a lot of abuse. We'll see if anything comes of it. It kinda surprises me to see so many calling for more regulation and transparency on this site. I'm all for it, though.
I just hope those big-government 'conservatives' don't look at this as an opportunity to over-regulate.
I think the regulation is ridiculous and shouldn't exist int he first place.
Since it does, and in the last 2 elections we were drummed with the bad influences money had on elections. Once their candidate decide to go back on his word and bypass public financing - mum was the word.
On top of that, the man who hopefully put the final nail in the public financing coffin, did so in such a manner that he opened himself up for illegal donations. McCain and Hillary both release all of their donor records - Obama thinks that kind of transparency is bad.
Obama: the hope, campaign finance violations, staffer vote fraud, political intimidation, lapdog media and change we deserve.
I think David Mathers has said enough to prove that this is a non-issue.
This sort of initial "Weeding out" of ilegal donors by matching address to billing address not only is insufficient, but irrelevant given that the real auditing goes on after the fact. Marc Ambinder searched through McCain's data base and found plenty of fishy donors.
In any case, lets also not be naive here:
McCain was just as secretive about his donations as Obama up until the point when it became clear that Obama would vastly outraise him
http://www.nytimes.com/2008/07/11/us/politics/11bundlers.html?_r=1&ref=politics&oref=slogin
Then, of course, it became politically interesting for him to raise that issue, since no matter how many fishy donors McCain had, Obama was likely to have more simply because he had more donors overall.
By the way, open secrets ranks obama as having a higher "quality of disclosure" than McCain.
So much for that talking point:
http://www.opensecrets.org/pres08/scoffall.php?cycle=2008
Truly astounding to see the contortions you Obama supporters go through to defend the Obama campaign. You cannot avoid the OBVIOUS problem. The Obama campaign turned off the very fraud filters that would catch most of the fraud on the front end. The very same filters that any online merchant worth its salt would use!!!
dlp, glad to see you drink the Obama KoolAid and take their word that it's all "weeded out" "on the back-end". Anyone who has worked in e-commerce can tell you this STINKS.
David Mathers,
You know, you left one tiny, but really useful bit of information out of your diatribe. Of course, the problem with that tiny bit of information is that it completely destroys your claims:
outsidethecode.com/faq/mid_qualified_rate.aspx
In short, by turning off AVS the Obama campaign lost money on every legitimate donation.
Now, you are correct, AVS only checks addresses. However, it would be embarrassing for the Obama campaign to have 500 $199 donations coming from the same address. So letting people enter fake addresses makes things much easier.
And, of course, you have to have a US Credit Card to pass AVS. So requiring AVS would cut down on the number of illegal foreign donations Obama received.
As for AVS charges, MasterCard does AVS for free. Some others may charge for it. However, consider this:
www.merchantseek.com/merchant_accounts_rates.htm
Address Verification System (AVS): $0 - $0.05 per transaction
The AVS service checks to see that the billing address given by the customer matches the credit card. If you opt not to use AVS, VISA and MasterCard will not support your transactions and will charge you an additional 0.17% to 1.25% on those sales.
Let's assume Obama got the 0.17% rate increase. His average donation in September was $86. He paid an extra 15 cents on each order, to "save" 5 cents. By disabling AVS, best case is he lost money on every donation > $30.
Big deal? Well, 0.17% of $150 million (his take last month) is $255,000. Having AVS on would have cost, at most, a third of that.
You don't lose hundreds of thousands of dollars on an "innocent mistake" that you had to work hard to get done.
Re: Nobody would need to hire an "army" of people to Google contributors if the Obama campaign bothered to turn on basic card fraud filters and algorithms.
??
But how are they turning these things off? It's the banks who validate the information because it's the banks who have the card holder's name and address stored in their system. All the Obama campaign (or any online entity) has is the information that the payer submits. (Yes, a donation from "Mickey Mouse" ought raise eyebrows, but one from "John Foster" should not; and I assume tthe names are used are more like the latter than the former) It's up to the bank to validate this info since only the bank can compare what is submitted with what is in its database on the card holder. How would Obama'a people, or any online business, have that info? We are not (yet) in Big Brother world where everything about everyone is instantly and easily available. What Obama's campaign gets back from the bank is either an authorization number if the transaction is approved or else an error code if it is rejected. If anyone is failing to do due diligence on these payments it's not the campaign it's the banks. Now you can claim that the banks are being lax at the behest of the campaign, but you need to make a case for that.
JonF
Did you actually read any of the comments concerning how this process actually works?
Well, I'm relieved. I was wondering how the Chinese were getting all that money to Obama, now that money to Hillary won't do them much good. The mechanism now seems obvious enough. A great investment for them, too - eviscerate the country at the top, a much cheaper way to beat the US than spending on fancy R&D or espionage.
So I guess requiring the AVS information would stymie Obama's Gazan donations? Well, that would be a tradgedy given the guge community of American Expats living in Gaza.
In the end, I [Megan] don't think it has made much difference; Obama isn't winning because of his massive pocketbook, but because the Republicans got caught in bed with a naked financial crisis
So, the economics blogger for The Atlantic doesn't think that Obama spending $600,000,000 is a difference maker?
As Barack raised the issue that his executive experience comes from running a campaign, how does that bode for the future?
Given unprecedented fund-raising, including a significant amount from dubious sources, the Obama campaign has been running on a net-zero / loss basis.
Groovy.
Too much is never enough.
What's odd is that Obama could have raised upwards of $200,000,000 illegally from foreign sources - what, you don't think that's possible or even likely? - and the economics blogger for The Atlantic can't bestir herself beyond giving Obama the benefit of the doubt.
Time to put Megan on the Trig Palin duty.
"...having worked in technology, I can easily imagine half-a-dozen scenarios in which a lazy tech overrode the security rather than actually fix some annoying bug."
Have you worked in technology in the last 10 years?
The lazy tech worker in question, had administrator rights over the fundraising website of a major US candidate (with revenue and transaction activity that dwarf most online retail outlets). A candidate whose managerial judgment is one of the primary reasons we are told we should vote for him. A candidate whose only meaningful qualification for the presidency is his likely successful run for president. If said lazy tech worker was trying to fix a bug, unchecking all the security settings as the "fix" implies that the person wasn't the best person to hire. You are being way too kind giving them the benefit of the doubt.
In the world of Sarbanes Ox and Verisign, no person who would administer such a system would be unaware of the security implications. There is an entire cottage industry dedicated to roasting company's like Microsoft for lack of security and any tech worker in system administration knows that security is a bit important in 2008. Given the load on this system, administration is not being done by light weights.
This was not ignorance or trying to fix a bug. This was a straightforward exercise of "its better to ask forgiveness than permission." Given the free ride by the news media that the Obama campaign enjoys, floating by on some fraudulent transactions is a perfectly rational choice for the Obama campaign to make. If they were to get caught, they simply fire the lazy tech worker in question, which will be a display of Obama's humility and leadership. Or something. But until they get pressed, its a wide open insecure system that would get the heads of any public corporation (as opposed to their lazy tech workers) thrown in jail if they were as "careless."
The interchange rates VISA charges depends upon which Fee Program the "merchant" is in.
A low volume commercial merchant with no AVS checks pays a very high rate. Goverment to Goverment pays a lower rate than the highest rated Commercial operation and no AVS is required. I don't know which Fee Program the Obama campaign is in.
"Republicans got caught in bed with a naked financial crisis."
Chris Dodd (against stricter regulation of Fannie and Freddie) is a Republican?
Maxine Waters: "Through nearly a dozen hearings, we were frankly trying to fix something that wasn’t broke." is a Republican?
Gregory Meeks: "I’m just pissed off at OFHEO [the regulators trying to warn Congress of insolvency at the GSEs], because if it wasn’t for you, I don’t think we’d be here in the first place. … There’s been nothing that indicated that’s wrong with Fannie Mae, Freddie Mac has come up on its own … The question that then comes up is the competence that your agency has with reference to deciding and regulating these GSEs." is a Republican?
Lacy Clay: "This hearing is about the political lynching of Franklin Raines." is a Republican?
Barney Frank: "I don’t see anything in this report that raises safety and soundness problems." is a Republican?
Rahm Emmanual, who served on the Board of Freddie Mac after leaving the Clinton White House, is a Republcian?
And, who knew? The four cosponsors of Federal Housing Reform Regulatory Reform Act in 2006 -- John McCain, Chuck Hagel, John Sununu, and Elizabeth Dole -- these heroes are all Democrats!
From a letter (May 5, 2006) demanding action concerning the looming crises with regards to Fannie and Freddie:
"...vitally important that Congress take the necessary steps to ensure that [Fannie Mae and Freddie Mac]...operate in a safe and sound manner.[and]..More importantly, Congress must ensure that the American taxpayer is protected in the event that either...should fail."
This letter was signed by John McCain, Chuck Hagel, John Sununu, Elizabeth Dole, Chuck Hagel, Wayne Allard, Jim Bunning, Rick Santorum, Conrad Burns, Larry Craig, Jim Inhofe, Jeff Sessions, Mike Crapo, Jon Kyl, Mel Martinez, John Thune, John Ensign, Jim DeMint, Tom Coburn (and two others whose signatures I can't read) -- 20 signers in all -- I had no idea they are all Democrats!
Yep, those Republicans sure got themselves caught in bed with a naked financial crisis, all right.
The only thing the Republicans got caught with in regards to the financial meltdown was a media so intent of fixing an election that they report the Newspeak Goodfact from the DNC Ministry of Truth rather than, you know, the actual truth: Republicans, including John McCain and George W. Bush, tried to fix the problems at the heart of the financial mess, and Democrats played see-no-evil obstructionist.
Sad to see certain Atlantic columnists fit the Orwellian mold, as well.
No, no, a thousand times no. The "vendor", in this case Obama's campaign, is responsible for vetting purchases made by credit card. The merchant is 100% liable for accepting a bad transaction. If a charge proves to be fraudulent, the card company takes the money back from the merchant's account.
Credit card companies help, for a fee, with the vetting by allowing the merchant to automatically compare the information provided by the "buyer", in this case the contributor to Obama's campaign, with the information contained in the credit card companies files. The important point is that the merchant does NOT have to use this vetting system. The merchant can turn off the automatic comparison of data used to vet transactions. That's what Obama's campaign did. Obama's campaign turned off the security vetting. That required an affirmative step on the part of the campaign.
Why did they do this? The only 'good explanation' is that the campaign was trying to save money by not paying for the vetting service (McCain's campaign says it pays 12 cents to vet each transaction). However, that explanation does not make any sense. The credit card companies charge a higher service charge for transactions that are not vetted. This increased service charge, a percentage of each transaction, is much more than 12 cents per transaction (unless the credit card companies have cut Obama a deal that they don't give to anyone else). So, NOT vetting costs the campaign money on a transaction by transaction basis.
Which brings us to the 'bad explanations' and the only explanations that make any sense: The campaign did this because it allows them to gather more contributions or the campaign is totally inept. (Note: It's hard to buy the "totally inept" explanation. This issue has been publicly known for weeks now -- articles written about Obama's Middle-East contributors were published more than a month ago. If they had "inadvertantly" turned off the security vetting, they would have turned it on within minutes of the issue being brought to their attention. The fact that they have not argues strongly that this is intentional.)
Internet porn merchants, reportably (I have no direct knowledge!), turn off vetting to allow their customers to buy porn anonymously. Perhaps the Obama campaign thought they could collect more contributions if people weren't afraid of the shame of contributing to the campaign? More likely, they were fully aware that their system would allow people to circumvent the campaign finance laws both in terms of the per person limit on contributions and of the prohibition on contributions from non-citizens.
What do we know? We know Obama's campaign has received illegal campaign contributions -- contributions that could not have been made had the campaign not turned of the automatic vetting of credit card transactions. If McCain had done the same thing, would any Obama supporter have been willing to give him the benefit of the doubt? If Bush had done the same thing, would any Kerry supporter have given him the benefit of the doubt? Obama has raised tens of millions of dollars from the Middle-East -- where there are virtually no US citizens. The Obama campaign claims it cannot tell which of these contributions came from legitimate sources and which did not (something that vetting would have made possible). Are we to believe that their self-imposed inability to vet contributions, which allowed them to accept millions of dollars in illegal and untraceable cash, was somehow a huge, but innocent, mistake? Ha!
Kleiman should know that people have been prosecuted for doing things like this (mainly when making "joke" voter registrations), so of course his statement would have been taken that way.
That's the truth, journalists do this all the time. But when a journalist employed by a newspaper does it, it's "free speech" and "investigation". When a blogger or concerned citizen does it, it's a "crime". Ridiculous.
And yes, I get more and more worried when the Obama campaign doesn't respond, or instead uses ad hominem, attacking the messenger as Kleiman did. Or responding to concerns about Acorn with "you're just trying to suppress votes!" Hey I live in Chicago I'm no naive fool, I know Democrats are just as likely to engage in crime as Republicans because I've seen it my whole life.
I wish Obama would reassure me that he is concerned and will prosecute any voter tampering no matter who is doing it.
Thank you Bob. Unfortunately, when dealing with the "reality based community", and I say this mostly from pesonal experience, they will tell you that they subscibe to the "perception is reality" concept. Though I suspect that it really means "MY perception is reality".
This is no shot at you Megan. I like your writing and tend to agree with you most of the time. I agree with this article except for the repeating of 'this financial crisis is of the Repubs doing" BS.
"Fraud" was a word before the lawyers declared that they owned it. We all know what it is. This is fraud.
Kleiman: Nice li'le donation you've got there. Be a shame if anything were to prosecute it.
McArdle: That sounds like extortion!
Kleiman: No, no, no, you've got 'it all wrong, guv! Oi was just admirin' the furniture. Very flammable furniture.
According to the Washington Times, Obama's campaign has received 4.6 M from overseas.
http://gopachy.com/foru/comments.php?DiscussionID=37716
http://gopachy.com/forum/comments.php?DiscussionID=37716
Your comment "Obama isn't winning because of his massive pocketbook, but because the Republicans got caught in bed with a naked financial crisis." is ironic. You can't make a reasonable election decision if you don't know who or what to blame.
Which is more believable:
() All of the big banks together, along with the GSE's (Government Sponsored Enterprises) Fannie Mae and Freddie Mac, decided that they could make money by making or buying risky loans, against government advice and regulation, and contrary to all past banking practice, OR
() They followed government policy, regulation, and incentive to make loans and sell them to Fannie and Freddie, under the loan terms that Fannie and Freddie found acceptable.
The current housing and financial crisis was produced by the Government, by Rep. Barney Frank (D, MA, Chairman of the Financial Affairs Committee) and Sen. Christopher Dodd (D. CT, Chairman of the Senate Banking, Housing, and Urban Affairs Committee), and supported by most of Congress.
The current cry is "not enough regulation", by the congressmen and senators who were in charge of the current regulation. Where is the deregulation that fed the current crisis? Fannie Mae and Freddie Mac were directly regulated by the Congress through a special regulatory authority OFHEO reporting to the House Financial Affairs Committee (Chairman Barney Frank presiding for the last two years). The claim is that people calling for less government and more freedom are misguided -- they just don't understand the threat of big business and Wall Street.
The failure of "regulation" in this financial crisis is the failure of Congress to regulate its own desire to buy votes with easy mortgages. The financial markets did just what most of Congress wanted. They lent money to Fannie Mae and Freddie Mac (off budget) so that FanFred could do the bidding of Congress. The financial markets traded in the mortgage securities that Fannie and Freddie were buying and selling in the market.
Congress is now saying "Yes, FanFred offered to buy up those risky loans, but you mortgage lenders should have had restraint and not made them so risky. How could you expect FanFred (or Congress) to look at the loans we were buying to see if they were good? You are greedy, bad men."
Most of the risky loans were bought by FanFred during the last two years, when Democrats were in majority control of the oversight committees that held hearings, and then ignored the testimony of their financial regulator OFHEO.
These two companies ruined world financial markets with the power and credit to buy up 90% of all U.S. prime mortgages and 20% of all subprime. Fannie and Freddie together guaranteed $5.4 trillion of housing debt (that is $5,400 billion, or $5,400 thousand million). Compare that to the previous $5.5 trillion budget debt of the US.
Many big banks jumped on the bandwagon. They lost sight of the risk in holding subprime loans. Hey, they could always sell their inventory to Fannie and Freddie. Except, when home prices fell a little, they couldn't sell these loans to anyone.
The market value of subprime loans fell in half when Fannie and Freddie collapsed and could not support that market with its increasing borrowing and purchases. That caused massive losses for institutions worldwide holding the other 80% of subprime mortgage bonds.
Congress ran Fannie Mae and Freddie Mac into the ground, plucking presents along the way. Congress set up Fannie and Freddie, took full responsibility by effectively (but unofficially) guaranteeing repayment of its debts, removed it from private market discipline, staffed it with the highly paid political elite, funded it through massive private borrowing outside of Government budget accounts, commanded it to do risky business below usual standards, restricted its regulation to a special office set up by Congress (OFHEO), and then ignored that regulator.
Any opposition came from some Republicans and the Bush administration, who were ineffective.
Blame the corruption of Congress, mostly the Democrats. They assumed oversight of a huge off-budget operation to grant risky loans, and ignored all corruption and warnings.
This is a failure of IN PLACE regulation, actively suppressed by congressional committees who looked the other way, because it was in their political interest for Fannie and Freddie to do just what they were doing. Their motto was "So far, so good".
Andrew Garland
EasyOpinions
Business Week on whether or not Fannie Mae and Freddie Mac are responsible for the sub-prime crisis:
http://www.businessweek.com/investing/insights/blog/archives/2008/09/fannie_mae_and.html
Michael said: "So when a 20 million dollar donation comes in from Rezko's Iranian friend not to worry right."
that's right, bucko. as long as it comes in 200 bucks at a time. but not to worry, no doubt the obama admin will look into allegations of fraud very thoroughly once the election is over :)
"[T]he Republicans got caught in bed with a naked financial crisis."
Good one, Megan. I mean it.
But it's just too bad that American in general don't seem to have realized that this naked financial crisis is a Democratic whore."
The fact that the crisis clearly began after GW took office and before the 2006 election might have something to do with how the public assesses who to blame.
I don't read the sinister signs into this that others do--having worked in technology, I can easily imagine half-a-dozen scenarios in which a lazy tech overrode the security rather than actually fix some annoying bug.
What an idiotic statement, but, of course the type we've come to expect from McArdle.
When taking money online, things have to work as planned. Especially when dealing with millions of dollars. They wouldn't have bought or used software that contained such a bug. Turning things off like this was about as clearly a conscious decision as they come.
For his part, Kleiman is just whining because he got caught.
And, for those who are actually considering voting for BHO, here's how little regard he has for the FirstAmendment:
24ahead.com/blog/archives/008047.html
And, here are other examples of BHO's supporters acting like fascists (bear in mind that if we elect BHO we're going to give his supporters power):
24ahead.com/blog/archives/008110.html
Especially see those DK threads. Those people would have gotten along great in East Germany.
And, here's BHO's creepy plan for pre-teens:
http://24ahead.com/blog/archives/008230.html
No, really. Check that out and send it to every parent you can find.
As a lawyer, I have to say it would be very interesting to haul before a grand jury all the people who put the Obama web site together and ask them what they did and why. It's possible that this was all an innocent mistake. But having read the technical explanations up thread, it looks to me like a deliberate effort to faciliate illegal contributions, which might even add up to a RICO violation. The way to find out is through a grand jury investigation. Let's hope that the Attorney General appoints a special prosecutor to investigate here.
"I'm not sure it was fraud. The National Journal article said what they did was buy a prepaid Amex and use it to make donations online to both campaigns. The McCain campaign kicked it because it couldn't verify a billing address (because it's a prepaid card) while the Obama campaign evidently didn't check if they matched."
Actually, having worked in fraud prevention for card processing for years, it depends on the set up for the screening program.
In many cases, prepaid cards either kick back a "match" on address verification (as if the ZIP code + the first 4 characters of the address, if digits, were the same as what the bank who issued the card has on file), or a "no response" response. A no response is not necessarily problematic, as it can often be due to technical issues, and not fraudulent intent.
Given that information, this reader:
"No, no, a thousand times no. The "vendor", in this case Obama's campaign, is responsible for vetting purchases made by credit card. The merchant is 100% liable for accepting a bad transaction. If a charge proves to be fraudulent, the card company takes the money back from the merchant's account."
is only partially correct.
Yes, the merchant is responsible for fraudulent purchases. However, the flag in question is not necessarily one which is an indicator of fraud. There is more to fraud prevention than one factor, including authorization response, IP geolocation, database matches, and the like. The business accepting the cards bears the costs of the fraud and the fraud screening, and have to make a cost/benefit analysis. If their screening is too stringent, they take the risk of deterring legitimate, if not 100% verifiable, transactions. If their screening is too loose, they run the risk of losses from fraudulent transactions.
Also, legitimate adult sites have the most rigorous screening available, because they are in a high fraud scenario. In many cases, their processors only carry them because they can verify the fraud prevention methodologies are accurate and effective.
Greg Q:
It is possible that, as Mr. Mathers and I stated, that the AVS check is being done, but that a particular result is not being flagged as fraud.
Ha! this is nothing! That is why you can read numerous, standard articles decrying the corrosive presence of soo much money in the elections. These articles, they...um..., uh,.. Wait. I cannot seem to find the usual slew of articles about this important topic this election cycle. I ...don't understand, - why with the amount of money being spent surely the usual suspects will be loudly bemoaning.... well, sooo much money is being spent, I would think that someone would ask..[THUD THUD] [sound of body slumping to floor.]
GREETINGS Companeros! The previous poster in this post accidentially hit his head and is getting the finest in collective medical care. We thank you for reading and, of course, we thank HIM, Ob_ma, may His Name be praised!!
The Republicans got caught in bed with a naked financial crisis? And I thought you were an economist. So it was the just the evil Republicans whilst Barney Frank, Chris Dodd, Maxine Waters, Franklin Raines, et al, are blameless.
That's objective of you. I guess blogging for the Atlantic is close enough to the MSM that I shouldn't be surprised ... but I am disappointed.
In the end, I don't think it has made much difference; Obama isn't winning because of his massive pocketbook
I kind of skimmed over this because of the asinine assumptions by Megan on how the AVS could have been disabled.
While I agree that the economic troubles are Obama's best friend (i.e., the average American wrongly believes this is the complete fault of Bush and the Republicans), it's completely disingenuous to suggest that the 4-1, and in some areas 6-1, difference in campaign money has not made a difference.
Hell, we were all just subjected to a huge Obama infomercial on primetime television. I mean, come on, how much in the bag for Obama do you have to be to state, with a straight face, that the money hasn't made that much of a difference?
Fraud Guy asks,
It is possible that, as Mr. Mathers and I stated, that the AVS check is being done, but that a particular result is not being flagged as fraud.
No, it's not possible. Why?
1: There are too many examples of clearly fraudulent transactions going through for this to be a case of a bug occasionally letting a bad one through.
2: Let's say they always had AVS on, and let "bad" charges through, but made sure to check all teh bad charges before actually running them. If that was true, "Adolfe Hitler" wouldn't have gotten so far through the system that he got a welcome letter from the Obama campaign.
3: Since AVS doesn't check name, only address, the only way to catch fraudulent donations is by being strict on the AVS.
I worked for a campaign that had to deal with campaign financing rules. we cared about not committing fraud, not just not getting caught.
If the Obama campaign cares about anything other than "not getting caught", they've done a very effective job in hiding that.