Imagine: that you log onto your savings, checking, or business bank account to find that your credit is maxed out, your savings are spent, and you’ve taken out several loans to buy products in Moldavia or Kyrgistan through a shadow corporation in New Zealand. Or imagine that for years, small transactions from your retirement account have sapped it of its value and now, years later, you find that your hard-earned money was stolen–syphoned from your account. Aside from panic, what can you do?
A job for the journalists:
The job of journalism is to afflict the comfortable and comfort the afflicted, some say. One might also argue that journalists must speak truth to power by asking probing questions and shedding light on the dark corners of our society. When journalists fail to probe deeply and instead rely on sensationalism of merely reporting the “bad news” that bleeds and leads, they frighten the readers, which often leads to chaos and tension. That is not a healthy atmosphere for informed decision-making at the polls or in the streets, in the office, or anywhere.
Vulnerability of institutions that we trust to hacking is not a new concern. The problem with the article above (3 line link) is that the journalist does not go far enough. He explains that any protections he thought he had against infiltration of his family’s entire savings and credit were laid low within 2 months. Why didn’t this journalist ask Chase Bank, Amazon, Visa, Twitter, Facebook, or any other institution, which held his family’s treasure but that was relatively easily hacked what could be done to increase security?
Why the institutions (banks and companies) should be held strictly responsible for repaying the consumer’s (that’s you) losses and restoring your credit when they are hacked.
1)The institution, call it a bank, profits through its use of your financial information and through holding your money. With power comes responsibility and that responsibility is to keep the savings safe.
2) Until the 1930′s, the United States suffered a series of bank panics, which caused “runs on the banks.” Savers who trusted banks to hold their money feared that banks would lose it in the market and therefore ran to get their hard-earned cash out. Until the FDIC and Glass-Steagal, bank panics led to bank runs. If banks cannot be trusted to keep savings safe in the event of a hacking, then bank panics are more likely, which would cause instability in the economy.
3) Individual consumers are ill-equipped to keep their money safe from hackers becaus the money is controlled by banks. The computers are also controlled by the banks. The consumer would not have access to those computers to improve security or the institutional expertise to improve that security. Caveat emptor is virtually impossible.
4) The banks must remain credible in order to attract deposits. If potential depositors do not expect the bank to keep the money safe, they won’t put the money in the bank. Why leave your money in a place you won’t expect it to be safe?
5) When burglar alarms fail and burglars get away with the loot, the alarm companies pay. When banks fail to afford proper security, and hackers get away with the loot, banks should pay. In both cases, the party responsible for and trusted to provide security was sleeping on the job. The party at fault should bear the burden.
6) The burglar would be liable for stolen money, but in banking and financial conduct, theft is a foreseeable risk of visibly gathering massive quantities of money. Where there is a known risk and trust, there must be responsibility for security.
Market competition cannot solve because consumers cannot take their money out of bank accounts:
1) Banks and the government encourage individuals to use accounts to save for retirement. The only way to receive the tax-advantages of a retirement account is to put your money in a bank. Those who do not use tax-exempt retirement accounts, but attempt to save money, are taxed every year on the interest accrued. Money in untaxed retirement accounts receives compound interest tax free and therefore grows your nest egg much faster and larger. In effect, someone who decides to save for retirement by putting money in the mattress will be punished every year by taxes even if that saver legitimately fears hacking of the bank.
2) Credit is required to make significant purchases, i.e. to buy homes or cars. To build credit, individuals need accounts and those accounts will be at risk of hacking and experienced investigation.
3) It is virtually impossible to keep money in a mattress and not lose it. Inflation and the value of the dollar fluctuate. Often, the dollar decreases in value comparatively. Money in a mattress loses value. A dollar 50 years ago was more valuable than a dollar today. The only way to retain that value is to ensure the market increases your dollars. That can only be done in a bank.
What can I do to avoid hacking?
Forbes offers these solutions, which include banking with a bank that requires additional identity verification.
And to recover stolen money:
What type of account was hacked? Different standards, laws, and regulations may apply to different types of accounts (checking, savings, business, corporate etc).
Speak with an attorney.