Felix Salmon

Here’s a way of monetizing the NYT’s paywall which I have to admit I hadn’t thought of: get advertisers to foot the bill!

I like this model a lot. I don’t know how much Lincoln is paying for this promotion: apparently the interstitial is being shown to about 200,000 regular nytimes.com readers without print subscriptions, with the intention that it will be adopted by roughly half of them. (Which goes to show how quickly people click past interstitials without reading them: this is basically free money that the other half are passing up.)

The subscription is the same one that you get for $15 a month: unlimited access to the NYT on the web and on smartphones, but not on the iPad app. If people taking Lincoln up on its offer want iPad access too, they’re going to need to pay an extra $20 per month — which I’m sure very few if any of them will do. So at the margin, this promotion is sure to further marginalize the iPad app as a source of NYT news.

If Lincoln were to pay the full $15 every four weeks from March 28 through the end of 2011, that would work out to $146 per subscriber, or $14.6 million. I’m sure that Lincoln isn’t paying that much. But even at a heavily discounted rate, the NYT is getting some healthy revenue here.

There are lots of unanswered questions here, though. Mainly: how does total revenue from Lincoln compare to the amount of revenue that the paywall would otherwise have extracted from the people shown the Lincoln ad? This promotion bespeaks a certain amount of insecurity on the part of the NYT: it’s willing to lock in Lincoln’s money now, rather than take its chances on trying to persuade a good proportion of those 200,000 people to sign up for the paywall.

The people who sign up for the Lincoln promotion aren’t handing over their credit-card numbers: they won’t automatically start getting billed when the promotion expires in 2012. And they’ll also learn that if you’re not a subscriber, you get shown offers for a free subscription. (Because I’m already a print subscriber, I’ll never see the ad.) In that sense, promotions such as these serve as an incentive not to subscribe individually.

The bigger picture here is that Lincoln is spending a large chunk of change from its advertising and promotions budget and giving it to the NYT. What’s the NYT going to do with the money? Will it consider it ad revenue, just like all the other money it gets from Lincoln? Or will it throw the money into the subscriptions bucket to make the paywall look more successful? If and when the NYT starts releasing numbers for digital subscription revenues, will they include this kind of promotion, even if brands like Lincoln would have found some kind of way of spending that money at the NYT regardless? I can imagine that debates over the success or otherwise of the NYT paywall are going to get pretty heated.

And while I’m on the subject, I have one other question about the paywall which I haven’t seen answered. The quota resets to zero at the first of every calendar month. So what happens if, say, my subscription expires in mid-July, after I’ve already used my subscription to read more than 20 articles that month? Does the paywall go flying up immediately, as soon as the subscription expires? Or do I still get 20 free articles that month — and then another 20 free articles in August? I can see why it makes sense for the NYT to tell me that I’ve read more than 20 articles and so I’m not entitled to read any more. But if I paid for those articles, why can’t I get any free articles, like non-subscribers can?

Caleb Newquist has a great post up at Going Concern showing how important it is for news organizations to publish primary documents, rather than just report what’s in them. He’s reacting to Boris Groendahl’s story at Bloomberg, headlined “HSBC Was Told About Madoff ‘Fraud Risks’ in Two KPMG Reports.” The story is pretty clear: KPMG warned HSBC twice — once in 2006 and once in 2008 — that there might be fraud going on chez Madoff.

But Groendahl and Bloomberg have posted neither the 56-page 2006 report nor the 66-page 2008 report: they’re telling, rather than showing. And they’re raising all manner of questions by doing so. Here’s Newquist:

What if the “risk factors” listed are just standard boilerplate risks that are included in every single one of these reports? If that’s the case, then KPMG was slapping in the applicable information as it related to BLM, handed it over and collected a nice fee. Maybe KPMG was all over this but there’s no way to know because A) Bloomberg didn’t republish the reports in full; B) Other KPMG teams close to Madoff are getting their asses sued which means they either ignored the risks or couldn’t get a hold of these two reports…

Did KPMG warn HSBC or not? This Bloomberg story seems to think so but there are is a lot of evidence that KPMG was just as clueless as as everyone else.

All these questions could be settled very easily by simply publishing the reports alongside the story.

There are three main reasons why news organizations don’t do this. The first is that they promised their source they wouldn’t; the second is that they’re worried about being sued for copyright violation; and the third is that they don’t want to give away to their competitors information which they worked very hard to obtain.

But the fact is that if you’re going to publish a story saying that KPMG warned HSBC about Madoff, and you have the proof, and you don’t supply your readers with that proof, you’re doing them a disservice. Groendahl and Bloomberg should try as hard as they can to get those reports up online. And if any of my readers have them, feel free to send them over: I promise to post them immediately.

It seems that the NYT has persuaded Lincoln cars to sponsor free digital subscriptions thru 2011 for “an exclusive group of frequent visitors” — Twitpic

THIS is where you should be donating your money: Ivory Coast’s Health System Collapses, MSF Steps in — VOA

Special Report: Mistakes, misfortune, meltdown: Japan’s quake — Reuters

Lack of Leadership Prolongs Mortgage Settlement Talks — American Banker

Moral for CEOs Is Choose Your Fraud Carefully — Bloomberg

The FDIC complaint against various WaMu officers makes for fascinating reading. I’ve embedded it below.

One thing that jumps out from the complaint is the enormous amount of very clear documentation here that the WaMu officers in question, up to and including Kerry Killinger, not only knew exactly what they were doing all along, but were very clear about it. They embarked upon an explicit strategy of increasing risk, by writing new mortgages, by concentrating on subprime, and by concentrating geographically. They were aware of the downside risks involved, and they went ahead with the strategy regardless. At the same time, they were very dismissive when it came to risk management.

There’s no indication whatsoever that the officers tried to hide what they were doing from their board or their regulators, or that they thought it was in any way wrong or illegal.

If the risks they took paid off, they would have been hailed as heroes, and the FDIC would have no problem with their behavior. There certainly wouldn’t have been a lawsuit like this one, since the FDIC has to show that it suffered damages before it can bring it.

I don’t like the idea of criminalizing failure. Banks by their nature are leveraged institutions which are vulnerable to runs and to declines in their asset values. There’s always a natural tension between managers, who are looking to maximize profits, and regulators, who are looking to minimize risks. But in this case there’s no indication that WaMu’s regulators, including the FDIC, expressed any concern about Killinger’s strategy. If they were OK with it, at the time, it’s easy to see how the executives considered that a green light to go ahead and implement it with gusto.

But at the same time, it’s unconscionable that these guys should be able to get away with what they did just because they did it out in the open, in front of supine regulators. They knew that they were too big to fail; they knew that ultimately WaMu’s liabilities (or at least its deposits) were being backstopped by the US government; and they knew that if they wanted to get their total compensation up into the $100 million range they were just going to have to take enormous risks and gamble with the money they had essentially unlimited access to at the Fed’s discount window.

Bankers have to be held to some kind of standard. And the standard put forward here, by the FDIC, in paragraph 184, seems a reasonable one to me. Indeed, it’s so clear and reasonable that it’s worth quoting in full:

As officers and/or directors, Killinger, Rotella and Schneider owed WaMu a duty of care to carry out their responsibilities by exercising the degree of care, skill and diligence that ordinarily prudent persons in like positions would use under similar circumstances. This duty of care, included, but was not limited to, the following:

a. To adopt such careful, reasonable and prudent policies and procedures, including those related to lending and underwriting, as required to ensure that the Bank did not engage in unsafe and unsound banking practices, and to ensure that the affairs of the Bank were conducted in accordance with these policies and procedures;

b. To communicate to the Bank’s loan officers and underwriters a clear expectation that they must adhere to sound lending policies and credit procedures by establishing a system of checks and balances and by careful monitoring of loan officers’ conduct;

c. To require that sufficiently detailed, current and reliable information be provided upon which they could make prudent decisions, including the use of current technology and internal control procedures to timely identify problems and allow for early remediation;

d. To support and foster WaMu’s internal risk management functions, and ensure adequate funding for these functions for a Bank of WaMu’s size and assets;

e. To develop contingency plans and take other proactive steps to limit or prevent significant financial losses in the held-for-investment single family residential home loans portfolio;

f. To consider and adopt reasonable recommendations from employees of WaMu’s Enterprise Risk Management department for controlling the Bank’s lending risks;

g. To timely acknowledge and adequately respond to changes in economic conditions that create additional risk with respect to certain types of products or transactions;

h. To enforce policies and procedures designed to ensure that loans would not be made based on inadequate or inaccurate information;

i. Upon receiving notice of an unsafe or unsound practice, to make a reasonable investigation thereof and to exercise reasonable business judgment with respect to all facts that a reasonable investigation would have disclosed;

j.   To carefully review reports of examinations and other directives of regulatory agencies, to carry out the instructions and orders contained in those reports, to investigate and cure problems noted therein, and to prevent any repetition of such problems and deficiencies; and

k.   To conduct WaMu’s business in compliance with all applicable state and federal laws and regulations.

To be sure, a lot of this is 20-20 hindsight vision. But at the same time, it’s basic common sense, and highly-paid bank executives should live and breathe this stuff every day. The fact that WaMu’s executives failed to do so was a significant contributor to a global financial crisis for which, to date, no senior executives have been found responsible at all.

This is by no means a cut-and-dried case, and I suspect that the FDIC will be more than willing to settle with the directors’ insurers before trial. The FDIC has always been particularly vindictive when it comes to WaMu, for reasons I don’t pretend to understand — something which comes out in this complaint when they decided to make the executives’ wives named defendants. It would be great, too, if the FDIC admitted it fell down on the job in terms of regulating WaMu in 2005-8.

Still, I’d like to see more of this kind of thing, rather than less. If only because that way it wouldn’t look like WaMu and its executives were being singled out. Where’s the equivalent suit, for instance, against Stan O’Neal?

Update: Here’s Steve Rotella’s response.

FDICsuit

Remember the weirdness surrounding LCD Soundsystem tickets? Well, it applies to sporting events too, as this video explains. Shortly after it was made, Jim Ledbetter sold his Knicks tickets for $500 each, which allowed him to net a pleasant profit on their $110 face value and still see the game from a cheaper section.

The NYT paywall has arrived: it’s going up in Canada today, and then worldwide on March 28. The most comprehensive source for the gritty details is this FAQ, which does things like explain the difference between an item and a pageview. (A slideshow or a multi-page article is one “item,” no matter how many slides it contains.)

The NYT has decided not to make the paywall very cheap and porous in the first instance as people get used to it. $15 for four weeks might be cheap compared to the cost of a print subscription, but $195 per year is still enough money to give readers pause and to drive them elsewhere. And similarly, 20 articles per month is lower than I would have expected at launch.

Rather than take full advantage of their ability to change the numbers over time, the NYT seems to have decided they’re going to launch at the kind of levels they want to see over the long term. Which is a bit weird. Instead, the NYT has sent out an email to its “loyal readers” that they’ll get “a special offer to save on our new digital subscriptions” come March 28. This seems upside-down to me: it’s the loyal readers who are most likely to pay premium rates for digital subscriptions, while everybody else is going to need a special offer to chivvy them along.

This paywall is anything but simple, with dozens of different variables for consumers to try to understand. Start with the price: the website is free, so long as you read fewer than 20 items per month, and so are the apps, so long as you confine yourself to the “Top News” section. You can also read articles for free by going in through a side door. Following links from Twitter or Facebook or Reuters.com should never be a problem, unless and until you try to navigate away from the item that was linked to.

Beyond that, $15 per four-week period gives you access to the website and also its smartphone app, while $20 gives you access to the website also its iPad app. But if you want to read the NYT on both your smartphone and your iPad, you’ll need to buy both digital subscriptions separately, and pay an eye-popping $35 every four weeks. That’s $455 a year.

The message being sent here is weird: that access to the website is worth nothing. Mathematically, if A+B=$15, A+C=$20, and A+B+C=$35, then A=$0.

Meanwhile, at least where I live in New York, a print subscription which gets you the newspaper only on Sundays costs $19.60 every four weeks — and it comes with free access to the web and tablet versions of the newspaper. Which creates the slightly odd proposition that if you want to use the NYT’s iPad app, you’re marginally better off subscribing to the print newspaper on Sundays and throwing it away unread than you are just subscribing to the app on its own.

The pricing structure is also a strong disincentive to use the iPad app at all, of course. If you’re already paying $15 every four weeks to have full access to the website, why on earth would you pay extra just to be able to read the paper on its own dedicated app rather than in Safari? I, for one, prefer the experience of reading nytimes.com on the web on my iPad, rather than reading an iPad app which has no search, no links, no archives, no social recommendations, etc etc. If the NYT wanted to kill any incentive to read and develop its iPad app, it’s going about it the right way.

What does all this mean for the New York Times Company? I can’t see how it’s good. The paywall is certainly being set high enough that a lot of regular readers will not subscribe. These are readers who would normally link to the NYT from their blogs, who would tweet NYT articles, who would post those articles on Facebook, and so on. As a result, not only will traffic from these readers decline, but so will all their referral traffic, too. The NYT makes more than $300 million a year in digital ad revenue, so even a modest decline in pageviews, relative to what the site could have generated sans paywall, can mean many millions of dollars foregone. On top of that, the paywall itself cost somewhere over $40 million to develop.

Against all that, how much revenue will the paywall bring in? A very large number of the paper’s most loyal readers are already print subscribers, and get access to the website at no extra cost. So the new revenues from the paywall will only come from people who read the website a lot but who don’t subscribe in print.

How many of those people are there? Emily Bell reckons that the number of people who’ll even hit the paywall in the first place is only about 5% of the NYT’s 33 million or so unique visitors. That’s 1.6 million people — compare the 1.3 million people who already subscribe to the paper on Sundays. The former is not a perfect superset of the latter, of course, but there’s a big overlap; let’s say that realistically the NYT is going after a universe of no more than 800,000 people that it’s going to ask to subscribe. And let’s be generous and say that 15% of them do so, paying an average of $200 per year apiece. That’s extra revenues of $24 million per year.

$24 million is a minuscule amount for the New York Times company as a whole; it’s dwarfed not only by total revenues but even by those total digital advertising revenues of more than $300 million a year. This is what counts as a major strategic move within the NYT?

As Ken Doctor notes, the Times Select fiasco, which was unceremoniously killed in 2007 to no one’s regret, was bringing in a good $10 million per year. This new paywall is much more elaborate and expensive, and it’s being introduced into a website which is currently something of a cash cow as regards ad revenues.

So by my back-of-the-envelope math, the paywall won’t even cover its own development costs for a good two years, and beyond that will never generate enough money to really make a difference to NYTCo revenues. Maybe that might change if the NYT breaks its promise to offer full website access for free to all print subscribers. But that decision would be fraught in all manner of other ways.

For the time being, though, I just can’t see how this move makes any kind of financial sense for the NYT. The upside is limited; the downside is that it ceases to be the paper of record for the world. Who would take that bet?

Update: Turning upside-down the conventional wisdom that consumers will only pay for financial information and porn, the NYT has decided that Dealbook will remain completely free, outside the paywall, at least for the time being. Which I guess explains why the Business and Dealbook sections are so clearly separated from each other online.

Jesse Eisinger has a conspiracy theory about the way that second liens are treated in the proposed mortgage settlement:

The proposed agreement — which is preliminary and subject to intense negotiations being led by Tom Miller, the attorney general of Iowa — would allow banks to treat second mortgages, like home equity lines of credit, just like the first mortgages. Under the proposal, when a bank writes the principal down on the first mortgage, the second should be written down “at least proportionately to the first.”

Suddenly, the banks would be given license to subvert the rules of payment hierarchy, as Gretchen Morgenson pointed out in The New York Times on Sunday. Yes, the clause says the other alternative is to wipe out the second’s value entirely, but given a choice, the banks would be extremely unlikely to do that…

When the principal on the first mortgage is reduced, the second lien is typically wiped out…

The proposal “seems astonishingly generous to the second-lien holders,” said Arthur Wilmarth, a law professor at George Washington University. “And who are those? Of course, they are the big mortgage servicers.”

I don’t understand this at all — especially not the “suddenly” bit. The mortgage settlement is designed to lay out basic minimum standards that mortgage servicers have to live up to. There have been a lot of sleazy practices to date, and the settlement is designed to put an end to such practices. But if you owe a bank a large amount of money on your home equity line, it’s not sleazy for the bank to ask you to pay at least some of that money back.

In any event, the settlement is in no sense allowing banks to do something they weren’t allowed to do before. The idea is to set rules for banks servicing first liens, remember — and the owner of the first lien has always had the freedom to leave the second lien entirely untouched if they want. In most cases, banks don’t actually want to do that. If you’re taking a hit on a secured loan, you don’t want to be bailing out someone whose debt junior to your own.

So the banks will always push as hard for the second lien to be written down as much as possible, except perhaps when the owner of the second lien is the same as the owner of the first. Jesse’s contention that the banks would be “extremely unlikely” to wipe out the second entirely makes no sense to me — that’s exactly what they’re going to want to do, in pretty much every case when they don’t own the second lien themselves. And in any case the settlement doesn’t allow the banks to do anything they haven’t been able to do all along.

Morgenson says that the proposal is “turning upside down centuries-old law requiring creditors at the head of the line to be paid before i.o.u.’s signed later” — but what we’re talking about here is a voluntary loan modification, not a foreclosure liquidation. The law determines what happens to the proceeds of a foreclosure sale; it says nothing about what banks can or can’t do of their own volition. If I lend you money, I have every legal right to forgive the loan entirely if I want, no matter how many creditors junior to me end up getting paid in full.

Eisinger and Morgenson might want to force banks to write second liens down to zero as a matter of public policy whenever there’s a loan mod on the first, but that would be step too far for me. Sophisticated banks already do a delicate dance with each other in these situations: the owner of the first lien wants the owner of the second to write down that loan as much as possible, but the owner of the second has a certain amount of negotiating leverage in terms of being able to hold up the modification or even push for outright foreclosure.

Let the banks dance this way: the outcome is normally fine, and no one is being unfairly taken advantage of. The AGs’ settlement seeks to enforce basic decency in mortgage servicing; it shouldn’t also try to enforce dubious policy on second liens.

Update: In the comments, ErnieD and Jesse Eisinger explain what the issue is here. The banks securitized the first liens, but they own the second liens. So modifying a first lien costs them much less than writing down a second lien. In that situation, there’s a big conflict of interest at servicers, which are owned by banks, and have a financial interest in transferring too much value from the first lien holders to the second lien holders.

This is a good point, but I’m still not convinced that the AGs’ settlement is the right and proper place to address it. Servicers are treating borrowers badly, and the settlement addresses that. On top of that, they may or may not be treating bondholders badly, too. Trying to address that issue simultaneously I think makes an already-complex agreement so hard to construct that it would never see the light of day.

Google Offers Advanced Chat for Collaborative Doc Editing — Wired

Goldman’s selling Litton. You could probably get it for 15 cents if you asked nicely — NYT

Why BGR switched back to an AT&T iPhone — BGR

This could be great: “Are Federal Judges Competent? Dilettantes in an Age of Economic Expertise” by Jed Rakoff — Fordham

Just catching up on this great post on interchange — Rortybomb

If FX moves were measured on the Richter scale, this one would be a monster — the yen managed to strengthen by 4% against the dollar and almost 6% against the Australian dollar in a matter of minutes.

This move is overwhelmingly due to technicals, rather than fundamentals: you don’t get jumps like this because people have donated a few million bucks in aid which is now being converted to yen. It’s not even because Mrs Watanabe is cashing in her high-yielding Aussie dollars because she needs the cash in yen right now. No: this is a prime example of how even an economy the size of Japan can be buffeted hard by international capital flows in the multi-trillion-dollar FX market.

The Japanese currency is now stronger than it has been at any time since WWII, at exactly the point at which it needs to start cranking up its export engine. And on the face of it the move doesn’t make a lot of sense: countries’ currencies are just as likely to fall in the wake of a natural disaster as they are to rise.

But what we’re seeing here is a function of ultra-leveraged hedge funds unwinding their carry trades. If you borrowed yen and invested in higher-yielding currencies like the Australian dollar or the South African rand, you made lots of money so long as the rate of appreciation of the yen was lower than the interest rate you were getting in the target currency. But when the yen starts to appreciate dramatically, you get margin calls, which force you to buy a lot of yen in an illiquid market, which in turn drives the yen up even further, which in turn not only increases the size of your margin call but also triggers a large number of stop-loss orders and other triggers embedded in exotic FX options. The result can be massive, as we’ve just seen.

The G7 is reportedly going to try to help out “to support financial stability in Japan”, but it’s far from obvious what they can do: currency intervention is rarely effective when you’re trying to push against the direction markets naturally want to go. It seems that Japan, after being hit first by an earthquake, then by a tsunami, and then by nuclear disaster, is now going to have to suffer the effects of a volatile and overvalued currency as well. It’s the last thing the country needs, and it does help bolster the case for some kind of Tobin tax.

Benzinga’s Laura Hlebasko sent me some questions about blogs and online media for a feature she’s writing. Here they are, along with my answers:

1) As an established journalist, what is the difference between you writing an article for traditional media and you writing an article for a blog? What do you like and dislike, or see as the benefits and limitations, of those mediums when you are reporting on a topic?

I find pretty big differences in how I write, depending on whether it’s for a traditional media outlet or for the blog. I have a more conversational voice on the blog — I think of any given post as being part of a much broader conversation between bloggers and between me and my readers. Nearly all of my posts are reactions to something elsewhere online, and I try to be as generous as I can with links. I’m also not one of those bloggers who likes breaking news: often I’ll actually wait for the news to be broken elsewhere before weighing in with my view, since it can be dangerous to mix subjective opinions into the reporting of hard facts.

Traditional media outlets, by contrast, generally have an incomprehensible love affair with Microsoft Word — a piece of software I loathe and try to use as little as possible. It’s generally more difficult to insert links, especially when I’m dealing with people who edit for print first and who then just put that edited copy up online. The pieces have to be much more self-contained, and you have to be much more careful about assuming any kind of expertise on the part of your readers: if they’re reading your stuff on paper, then it’s much harder for them to Google anything they don’t understand.

The upside of traditional media is that you generally put a lot more time and effort into reporting, editing, and illustrating stories. They go through many iterations before being published, and nearly every iteration makes them better. What you lose in quantity, you often make up in quality.

2) Most of the talk about blogging and its impact on traditional journalism has centered around declining readership and revenues for traditional print media, questionable credibility of blogs, etc., etc.,– what are some of the unseen, underreported, or not-yet-fully-realized impact of blog reporting vs. traditional journalism?

The main impact I think is the way that blog reporting can iterate. In traditional media, you report the story and then you publish it; with blogs, you can start with something much less fully formed and then come back at it over time in many ways and from many angles. Every print journalist knows the feeling of publishing a story which is read by great sources who then provide lots of really good information which would have been great in the original piece. Bloggers don’t worry about that: they just put up a new post, or an update.

Blogs can also geek out in a way that traditional journalists can’t. There’s no space constraint online, and so if I want to spend 5,000 words writing about vulture funds, or a reporter at HuffPo wants to spend 4,000 words getting into the weeds of regulatory reform, they can. Or look at the Ars Technica reviews of every new Macintosh operating system. That kind of material can be incredibly popular, but it just doesn’t work in print. Blogs have a reputation for being superficial, but they can also be much more detailed and accurate than traditional journalism. Not to mention the fact that they’re often written by genuine experts in their fields, rather than by journalists.

3) How do you think blogging has changed the nature of the news and information people consume? Since blogging allows for more reader-driven content than traditional newspapers, what do you see readers choosing to focus on in terms of news?

Blogging has clearly given readers a much wider range of news sources to choose from, and it’s great that readers are no longer confined to getting their news from a handful of outlets. Everybody’s different, though: some people become loyal to certain sites, others get their news from Twitter or Facebook or Google Reader, others still just follow links from the AOL home page because they haven’t updated their browser settings since 1996. In aggregate, it’s easy to see what people are reading: just look at the ubiquitous “most-read” lists which are on pretty much every news site these days. But the aggregate figures hide a wonderfully diverse range of unique individual reading patterns. And the more you generalize, the less useful the information you’re getting becomes. The web is much better at narrowcasting than it is at broadcasting.

4) How has Twitter impacted journalism?

It’s made news reporting much more distributed: no photojournalist produced anything like this, for example. It’s massively increased the velocity of news: people now know what’s going on before it’s formally reported. It’s made it easier to find things you didn’t know you were interested in. It’s given journalists a much more human voice, an outlet where they can be themselves. It’s helped build a culture of linking to wonderful stuff. It’s made the world smaller, and it’s made news travel faster than ever. Overall, it’s been great.

5) Are there any aspects of journalism that are “untouchable”, that won’t (or shouldn’t) change no matter what new technology comes along?

I think that depends on what you mean by journalism. Professional journalists should always be beholden to high standards of professionalism, ethics, and accuracy. Random people with a Twitter account, not so much. And of course there’s a spectrum between the two, there isn’t a bright line.

6) What is/are the main way(s) blogging has evolved since you began, and how do you see it evolving both on its own, and in its effects on journalism, in the future?

Old-school blogging, where an individual puts their own work up on a dedicated website in reverse chronological order, is clearly on the decline. It’s been replaced by Twitter and Facebook, on the micropublishing end of things, and by big professional sites like Business Insider or Huffington Post, at the other end of the spectrum. Mainstream news organizations have all embraced blogging to a greater or lesser extent, although a lot of them use the existence of blogs as an excuse not to do much in the way of external linking elsewhere on their websites. In general, news sites are becoming bloggier, with more assiduous editorial standards, while big blog sites are becoming newsier; that trend is likely to continue. But it’s still possible to make a name for yourself by starting a blog! And it’s also a great way of improving your writing and general communication skills. More people should do it!

It’s good news that Tim Geithner is throwing his weight behind efforts to build a US market in covered bonds. This made sense back in 2008, when I did my best to explain what exactly covered bonds are, and it makes sense today as well. The more different ways that mortgages can be funded, the less pressure there is on the US government and government-owned agencies like Fannie Mae and Freddie Mac to fund just about everything.

The problem is that the government has lots of different arms, and one such arm — the FDIC — has issues with covered bonds. At the moment, the FDIC can wipe out billions of dollars in unsecured bank debt when it takes over a failing institution, like we saw with WaMu. If banks moved to a covered-bond system, then a lot of bank debt might be secured rather than unsecured, which raises the prospect of bigger losses for the FDIC.

My feeling is that the importance of fixing the broken mortgage-funding system is more urgent, right now, than shoring up the FDIC — especially given that the covered bond market, if and when it emerges, will in the first instance be very small and pose little systemic risk. Covered bonds have an important role to play, here, so let’s at least make them possible. They might well never really take off. But it’s worth a try.

Stephanie Strom has a fantastic article in the NYT today, which actually reports out the whole issue of why it’s silly to donate money to Japan. Go read the whole thing, but here’s some choice bits:

The Japanese Red Cross, for example, has said repeatedly since the day after the earthquake that it does not want or need outside assistance. But that has not stopped the American Red Cross from raising $34 million through Tuesday afternoon in the name of Japan’s disaster victims…

The Japanese government so far has accepted help from only 15 of the 102 countries that have volunteered aid, and from small teams with special expertise from a handful of nonprofit groups…

Many of the groups raising money in Japan’s name are still uncertain to whom or to where the money will go…

Holden Karnofsky, a founder of GiveWell, a Web site that researches charities, said he was struck by how quickly many nonprofit groups had moved to create ads using keywords like “Japan,” “earthquake,” “disaster,” and “help” to improve the chances of their ads showing up on Google when the words were used in search queries.

“Charities are aggressively soliciting donations around this disaster, and I don’t believe these donations necessarily are going to be used for relief or recovery in Japan because they aren’t needed for that,” Mr. Karnofsky said. “The Japanese government has made it clear it has the resources it needs for this disaster.”

The NYT has, smartly, disabled commenting on the article — people get really emotional about this subject, and can be astonishingly bad at understanding what you’re saying. (No, Bill O’Reilly, I did not tell the government not to send aid; I did not say that there wasn’t much relief in Haiti, and I certainly didn’t say that we shouldn’t send money because “we don’t have any money, we’re bankrupt.”) But Strom’s message is important — the Japanese Red Cross is very explicitly and repeatedly saying it neither wants nor needs the money that the American Red Cross is raising for it. So if you’re going to donate money to a desperate cause, there are much better ways of doing so.

I enjoyed moderating my SXSW panel yesterday on whether and how Internet startups are disrupting the banking system. There was a good range of small, tech-savvy panelists, and they’re attacking the financial giants in very different ways.

Sean Harper from Fee Fighters has a website designed to make it much easier for merchants to get the best deal from their payments processor — his company doesn’t take any risks itself, and is essentially a merchant-friendly broker in an area which has historically been plagued with opacity. Noah Breslow from On Deck Capital takes credit risk: it’s an online small-business lender, which now has about $100 million in loans outstanding, and which has automated everything from origination and underwriting through to loan servicing. Shamir Karkal from Bank Simple is starting up a whole new retail-focused bank, which I’ve written a lot about in the past — but he doesn’t have his own banking license, instead choosing to use an already-existing bank to speed up the time to launch. Finally Suresh Ramamurthi actually went and bought a tiny bank in Kansas and is looking to discover from the inside how the deep plumbing of the banking system works in practice and how it can be improved. It’s a very long-term project, but it could be by far the most important of the four.

All four of these companies are doing very interesting things, and I’m sure the first three will take some small amount of market share from the big banks by offering friendlier, cheaper, and more efficient services. But my main question for the panel was whether they would actually change the financial system at all, or whether they will always be operating at the margins while the huge players continue to do what they’ve always done, and innovate on their own terms at at their own speed.

Certainly big banks and other financial players innovate slowly. They’re huge, and huge companies can’t be nimble. And they’re also hobbled by trying to combine lots of incompatible legacy systems from all the various smaller banks that they’ve bought over the years. But at the same time, the startups are never going to scale up to megabank size, no matter how attractive their value proposition is. They’ll do clever things with early adopters, and then eventually the big banks will follow suit, or else simply buy them. Huge banks don’t put much store in first-mover advantage: they’re happy letting startups do innovation and then copying what works. It’s certainly a lot easier than putting enormous amounts of money and effort into products like Virtual Wallet which have difficulty getting traction.

Banks also have to deal with vastly more regulatory oversight than startups. To a large degree startups perform the important role of being able to innovate in a largely unregulated environment, and create products which can then be tailored to meet regulators’ requirements. In that sense, it’s good news that the startups aren’t truly disruptive in the sense of replacing the old business models, because otherwise we’d be looking at something which was fundamentally a regulatory arbitrage and which would move even more of the banking system into the regulatory shadows.

And then, this morning, as SXSW Interactive was coming to an end, Visa made what could well turn out to be a truly game-changing announcement: it has built a system allowing individuals to transfer money directly to anybody with a Visa credit or debit card. You don’t even need their card number — an email address or phone number will suffice.

As far as I can tell, this service will only be available, in the first instance, to customers of banks who have signed up for it: you can’t just sign up for it yourself, on your own. But I can easily see it becoming the largest person-to-person payments system in the country. Does anyone have numbers on how many Americans have Visa cards of some description, versus how many have, say, a PayPal account? Systems like this don’t need to be first, or best. They just need to be big, and Visa’s great at being big.

My first monthly Gastronomics column is up at NYMag, on the subject of the economics of bad service. Why are restaurants which do the best job of maximizing discomfort, inconvenience, and noise also the ones which are the most popular? My theory is that it’s all about signaling: that if restaurants succeed at manufacturing crowds and long waits, people reckon that the place must be good, otherwise everybody else would never put up with such things. And so they become self-fulfilling.

There’s a lot more other stuff to cover in this space, so do let me know if you’re in the restaurant/bar business and are happy talking about matters financial and economic. Or if you have any questions which have been niggling at you about the way that these places make money.

Update: Via Eater, Steve Plotnicki explains the downside of foisting bad service on your customers.

What it looks like when you combine serious and unserious news stories — someecards

“The great trick of the last few years has been convincing private and public-sector workers that their interests somehow diverge from one another” — WaPo

Nice video on congestion pricing — Streetfilms

Really smart comment on the dynamics of urban transportation — PaytonC