• Fake tweet shows country 'sensitive to any news that sounds like terrorism'

    By Bob Sullivan, Columnist, NBC News

    A stock market and a nation already on edge was temporarily knocked off its axis on Tuesday by a single fake tweet. 

    Following a hack attack, the Associated Press' verified Twitter account posted "an erroneous tweet" claiming that two explosions occurred in the White House and that President Barack Obama is injured. Moments later, the @AP Twitter account — with nearly 2 million followers — was suspended.

    "That's a bogus tweet," an AP spokesperson initially told NBC News, a statement that was repeated by the company's corporate communications account. Though the false tweet disappeared, the false message continued to exist on the service in over 4,000 retweets.

    The chart of the Dow Jones industrial average just after 1 p.m. may as well have been a chart of America's heartbeat -- stopped for a moment, again, by seemingly horrific information. The Dow lost more than 140 points almost instantly, before recovering five minutes later.

    It's incredible what a single 12-word lie can do.

    The markets plummet, and then snap back after a fake AP terror tweet, with the "Power Lunch" crew.

    "We're in an environment where we're sensitive to any news that sounds like terrorism," said Art Hogan of Lazard Capital Markets.  "That makes it that much more believable. That's the tricky part. When something like AP gets hacked, it becomes reality for a period of time, until it's not."

    The market's reaction hints at the our collective fragility right now.  In the past, carefully crafted fake press releases or other Internet disinformation has been able to influence individual stocks both up or down.

    But a single Tweet sinking the market?  It's just the latest sign that lies now spread on the Internet as fast as computer viruses, and can have just as much impact. Like the false rumors that spread like wildfire during the Boston bombing aftermath, or Hurricane Sandy before that, Twitter's surge to mainstream popularity — it now boasts 140 million U.S. accounts — has made it an incredible source of on-the-spot information, but also the world's most powerful rumor-mongering tool.

    "You wonder who did it and whether it was done on purpose. It certainly was an instant implosion," said Art Cashin, director of floor operations for UBS Financial Services, who watched the minutes of bedlam on the floor of the NYSE. Cashin said the reaction was especially dramatic because it said the president was injured.

    If you define the term "hacking" loosely, you might consider that whoever wrote the fake tweet hacked not only AP's account, but the entire Wall Street trading system. The trades which sank the market Tuesday were almost certainly initiated by automated trading programs designed to profit by fast-twitch reacting to good or bad news.

    The combination of a jittery public, automated trading, and a worldwide rumor tool was toxic for the markets.

    "That goes to show you how algorithms read headlines and create these automatic orders — you don't even have time to react as a human being," said Kenny Polcari of O'Neil Securities. "I'd imagine the (Security and Exchange Commission) is going to look into how this happened. It's not about banning computers, but it's about protection and securing our markets."

    It's also about figuring out how to handle a world where the firewall between seemingly disconnected systems like Twitter and brokerage servers is really only 91 characters long, particularly a world where skepticism’s classic grains of salt seem to be in short supply.

    CNBC's JeeYeon Park, Patti Domm and John Melloy contributed to this story.

    Related: AP Twitter account hacked, posts false White House scare

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  • Sarcasm campaigning: Social media hones cynical edge in presidential politics

    In the first presidential campaign since social media came of age, the campaigns of President Barack Obama and Mitt Romney are both struggling to learn the new rules of the road.

    By Bob Sullivan, Columnist, NBC News

    When you're watching the first presidential debate Wednesday night, don't believe what you see. Online, that is. As Mitt Romney and Barack Obama make their inevitable slip-ups and fact-challenged assertions, bring your well-trained skepticism to every computer, cell phone and tablet screen near you.

    Jokes that seem to catch fire on their own -- remember Clint Eastwood's invisible Obama from the Republican convention? -- might not be quite so organic. Twitter themes that seem to be everywhere might not be popular so much as purchased. And stinging one-liners that show up in your streams and news feeds might make you chuckle, but they are probably half-truths, and most definitely not a great tool for picking the leader of the Free World.

    Even if you aren't on Twitter, virtually all political reporters are, and they increasingly take their cues from it. This is the first presidential election in which social media will play a mainstream role, and it's important to remember not everything is as it seems online.

    Four years ago, Facebook and Twitter had only just begun to capture the world's imagination (Pew says that 10 percent of the electorate used social media in 2008 to research candidates, and Twitter was scarcely 2 years old on election night). But with this election cycle, the social media giants are now key outlets for candidates to transmit their messages to voters. While social media may appear to offer unfettered, uncontrollable discussion of candidates and their positions, the campaigns are hard at work learning how to manipulate the tools to their advantage. And there's added spice to the Internet element of this season's presidential campaign -- because social media is so new, rules of engagement are lacking.

    For example, Barack Obama famously held a surprise virtual town hall on Aug. 29, offering to take questions from Reddit.com users, embracing that site's standard "Ask Me Anything" (AMA) format. The event was unusual because it occurred during the height of the Republican National Convention, breaking the well-established convention that candidates don't upstage each other during their opponent's convention. Obama almost certainly wouldn't have held a traditional press conference that day -- but a Reddit AMA?  Who's to say that was a violation of unwritten politicking rules? When suspicion arose that questions from the AMA might have been less spontaneous than they first appeared, many observers chimed in with cynical reminders that real-world town halls and press conferences also include plants. Who's to say what rules should apply on Reddit?

    About the same time, Romney's campaign made what is believed to be the first major campaign purchase of a "sponsored hashtag," attempting to corral discussion on Twitter around the topic "#AreYouBetterOff?" Simultaneously, a parody Twitter account named MexicanMitt was temporarily suspended. A month or two earlier, Romney's number of Twitter followers shot up by a surprising amount. Are such hashtag purchases tasteful? Was suspension of the account coincidental? Is it fair to purchase followers? Again, the online rules aren't clear. 

    There is little argument that Obama's campaign, which held an exclusive on grass-roots Internet campaigning last time around, holds a major advantage over Romney on Twitter and Facebook. Some of that is pure demographics -- new Web tools skew younger and more liberal. But some of it is the result of well-timed sarcasm campaigns. Each time Romney trips over his tongue, you can be sure a cascade of social media comedy  -- a "meme," in Internet lingo -- will follow. Sometimes, that's an organic outpouring of creativity. Sometimes, that's the work of an Obama supporter like Matt Ortega. He told Salon earlier this year that he was behind a website named "EtchASketchMittRomney.com," which appeared almost immediately after top Romney aide embarrassingly said that the candidate's campaign positions in the GOP primary could be easily changed, as if they were written on an Etch-A-Sketch. Ortega said he owns dozens of other similarly sarcastic websites, all powered by the pickup they get on Twitter and Facebook. Ortega is a Democratic consultant, but swears the sites are unpaid hobby work.

    Turning candidates into punch lines
    There's certainly nothing wrong with being funny. Obama's Reddit chat didn't break any rules; neither did Romney's Twitter advertising. But is social media a free-for-all? Perhaps, said Brad Phillips, a media consultant who runs MrMediaTraining.com. But he's not convinced that social media has made things worse. Campaigns have always stretched the rules -- and the truth -- to get any advantage possible, he said.

    "Think about the Willie Horton ads (pillorying Michael Dukakis in 1988). So many others," Phillips said. "If the Internet existed in those campaigns, would they have used online tactics? Of course." Nor would campaign managers from elections past have fretted about scheduling a virtual press conference during an opponent's convention, he said. In some ways, he's surprised there hasn't been much evidence presented yet of "dirty tricks" online, such as the whisper campaign during the 2000 primaries alleging that John McCain had an illegitimate child.

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    On the other hand, Twitter and Facebook have created one huge new avenue for attack, Phillips said -- the power of humor. Once upon a time, the biggest threat to a candidate could be a misstep so bad that it became fodder for late-night TV humor on Johnny Carson's "Tonight Show."

    While that's still true -- an unplanned appearance on David Letterman's Top 10 List can really hurt -- Twitter and Facebook allow campaigns to create their own late night butt-of-joke moments without needing a comedy writer to see it their way. It's easy to argue that the real damage from Clint Eastwood's halting Republican Convention speech came from the hours of sarcastic Tweets and Facebook discussions that began before Eastwood even finished speaking.

    "In the past, you knew a crisis had jumped the firewall when it appeared on late night TV as a joke....that meant the issue had gone beyond being just a story for political types," Phillips said. "You wonder if same dynamic is played out now online. If you can make a candidate a punch line (in social media) you've scored a hit."

    Phillips also said sarcastic memes could slowly but surely wear down a candidate's chances, cumulatively building and impression that "a candidate is a joke," which would be hard to counteract.

    "Is that clean (campaigning)?" he asked. "I don't know. But in future political cycles, I believe candidates will have to pay a lot more attention to this."

    Clean or not, University of Virginia professor and presidential politics expert Larry Sabato has been sharply critical of both campaigns -- and political reporters -- for getting caught up in what he calls the "Gaffe Game." Hunting for the next one-liner is a poor way to evaluate presidential candidates, he says.

    "When we tire of Gaffe Game, let's have a POTUS Spelling Bee. Would be about as revealing," he said recently in his own Twitter feed.

    Scoring points through sarcasm is hardly new, but Sabato believes social media has indeed accelerated the gaffe obsession in this election cycle.

    "Many people are on (Twitter) for hours every day. Do they make it worse? Is the pope German? They drain every gaffe of every ounce of meaning and political advantage," he said. "Every time a candidate has a blunder or tongue-twister, Twitter explodes with commentary defending and deriding the candidate."

    On the other hand, there is hope, Sabato thinks. Social media seems to accelerate the news cycle, too, meaning that gaffes come and go quicker than they would in the past.

    "They … destroy the gaffe quickly -- it burns itself out on Twitter faster than it would otherwise," he said.

    Campaign zingers now 140 characters?
    So does social media help or hurt the election process? Naturally, it's impossible to say. But it's important to note that voters shouldn't be fooled by what might seem like more personal connections offered by candidates through Facebook "Likes," "personal" e-mails and Tweets. In Phillips' impression, candidates are far more sterilized and prepackaged than ever.

    "The candidates are so carefully controlled, access to them is controlled, they are trying to prevent any kind of YouTube moment. (Candidates' moves) are planned within an inch of their lives," he lamented. It's hard to believe that only five presidents ago, reporter Sam Donaldson and President Ronald Reagan sparred during fairly spontaneous press conferences. And vice presidential candidate Geraldine Ferraro spent two hours answering reporters' questions about her tax returns.

    Today's candidates usually hide behind carefully orchestrated digital personas, lobbing one-liners over the wall in an attempt to slowly move the needle on the small number of undecided voters who will swing the election.

    "Candidates are giving away the ability to have a knockout fantastic answer," he said. "They are just trying to advance in inches not in yards," he said.

    That raises the discouraging possibility that the key to who wins and who loses on Nov. 6 could be which candidate comes up with the best joke that fits in 140 characters or fewer.

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  • Why is housing market stuck? This family offers one answer

    Ron and Cheryl Schmalz describe the paperwork nightmares they faced while trying to get a loan modification so they could keep their Chicago-area home, while Christine Nielsen of the Illinois attorney general's office explains the scope of the problem.

    By Bob Sullivan, Columnist, NBC News

    CHICAGO — Ron and Cheryl Schmalz think they know one reason the U.S. housing market is stuck. They just spent more than two years and created about 50 pounds' worth of paper trying to get a $300-per-month modification to their mortgage. 

    Nearly every month for the past two years, the Schmalzes received a warning from their mortgage holder, JP Morgan Chase, that the bank was about to foreclose on their home and that late fees were mercilessly piling up. Nearly every two months, the couple would dutifully fax in a pile of paperwork reminding the firm that they were participating in its loan modification program and making trial payments prescribed by the bank.

    "We had 17 different relationship managers," said Ron Schmalz. "They just make you file the same papers again and again and again. And each time you get a new manager, you have to start over. The last time we thought we had a permanent modification, we got another call that said, 'Hi, I'm your new representative.' It makes you crazy."

    There are many troubling clogs in the mortgage pipeline that are keeping the housing market stuck — lenders aren't lending; there are too many homes for sale; there's a lack of buyers because of poor employment prospects. But one critical clog is the limbo faced by homeowners who can't afford their full mortgage payments any longer but who could survive if their loans were refinanced or modified. In 2009, the Obama administration launched its Home Affordable Modification Program (HAMP), estimating it would help keep 5 million families in their home — and keep 4 million empty houses off the market, critical to the health of the housing market. At the same time, banks committed to continuing their similar, parallel proprietary modification processes.

    Bob Sullivan / msnbc.com

    Ron and Cheryl Schmalz look over the mountain of paperwork they amassed while trying to obtain a modification on their home mortgage.

    The Schmalzes' odyssey is a window into the challenges faced by homeowners looking for help, by government regulators trying to prop up the failing market and by banks trying to pick the right bets among mortgage holders who might be able to pay some, but not all, of their monthly payments.

    The Schmalz family has a happy ending. After two years of effort, the monthly payment on their Chicago-area home was reduced from about $1,175 a month to $861. It's not a free ride: Their original $90,000 mortgage is now a $98,000 mortgage, and the couple will make up for the lowered payments with additional payments on the end of the loan. 

    Still, the break the couple got in April represents the end of a nightmare that began in September 2008, when Ron lost his job in telecommunications and the couple told the bank it needed help. It's a Red Tape wrestling match that Ron Schmalz says can break the spirit of homeowners who might otherwise be able to ride out the rough employment market.

    "You keep going and you keep giving and you keep doing and you keep faxing and you keep calling to no avail. And you just feel like you're a gerbil," said Ron. "You're sitting in a wheel going nowhere."

    Right after losing his job, Ron Schmalz began working with Washington Mutual, the original mortgage holder, on the modification paperwork. By early 2009, it was clear the application was in trouble, as Chase's acquisition of Washington Mutual had thrown things into disarray. After a few rounds of resubmitting required tax forms, income statements and monthly budgets, the Schmalzes were denied. 

    Ron Schmalz had found a new job by then, albeit at a lower salary, and for a few months in 2009, the couple tried to keep up with their $1,100 payments. But then Cheryl lost her job, they missed a payment, and they resubmitted their application. Working with Chase's proprietary modification program, rather than the government's HAMP program, they were given a temporary modified payment around $800 per month. The couple says they dutifully made the new payments beginning in January 2010 and were told that within three months that Chase would decide whether the adjustment would be made permanent or rescinded, so either way, they could move on with their lives. 

    Then, 14 months passed.

    Letters saying "We are prepared to start foreclosure proceedings" arrived every month. Ironically, they all included instructions on how to enter a loan modification program.

    Almost as frequently, the Schmalz family says, they were told they'd forgotten to submit a tax form or an income form, or that their file was incomplete, so no decision could be made. With nearly every conversation, there was a new "relationship manager."

    "It's about obstacles. It's about what they placed in front of us to make this modification a reality. It made things very difficult," Ron said.

    There's no way to know who's to blame for paperwork mishaps, but the Schmalzes brought quite an organized pile of documents and file folders with them to show a reporter.

    "Things got so tense that we were at each other's throat, saying: 'Did you file this? Didn't you file that?' You know, sometimes blaming each other," said Cheryl. By that point, they'd fallen behind by $10,000, and "the tune of our conversations with Chase got nasty."

    In the middle of 2010, the couple turned to Illinois Attorney General Lisa Madigan looking for help.

    After a flurry of complaints dogged the various loan modification programs, Madigan's office had created a special division to deal with consumers facing the Schmalzes' plight. The agency gets about 200 calls per week to its mortgage help hotline, said Christine Nielsen, who heads the division. It brought on two full-time housing counselors to help homeowners submit loan modification requests to banks; still, she's seen the difficulty consumers have when working with banks. Despite a flurry of complaints about modification applications in late 2010, homeowners are still being left in the lurch.

    "Consumers are still having a fair amount of difficulty getting answers from banks about their loan modification applications," she said. She said the Schmalz case was typical of the problems consumers are encountering, but some are much worse. One recent applicant was turned down for a modification by another bank (not Chase) because of a difference of $20 per month, she said.

    Chase wouldn't discuss the specifics of the Schmalz case, other than to say the firm provided the family with a "special forbearance" in 2010 and a modification in 2011.

    "In general, we need complete and current information from a customer to make a modification decision," a Chase spokesman said. 

    Timely processing of modification applications is essential to the housing market recovery, said Madigan.

    "Our nation continues to be in the grips of a home foreclosure crisis of unprecedented proportions. Meaningful loan modifications — ones that truly reduce a homeowner's payments to affordable levels — can save homes, yet people often face serious obstacles attempting to navigate the loan modification process on their own," Madigan said. "Resources provided by my office and other HUD-certified housing counselors can help people received a modification by ensuring banks comply with federal modification guidelines."

    As the modification process drags out over months, or even years, it's easy to understand the problem facing both banks and consumers. Generally, banks are working off an affordability formula based on income. Financial circumstances change; applicants can and do lose or recover income after they submit an application, which requires a recalculation. That explains part of the delay faced by the Schmalz family.

    Excessive delays, however, lead inevitably to such changes. A family that applies for help because of a loss of income will be working immediately to replace that income. That places them squarely in a catch-22 — success finding a job could lead to failure in a loan modification application or, more specifically, in the conversion of a temporary to a permanent modification. The delays leave the family in a perpetual state of uncertainty, with a pile of threatening bank letters rising. It also leaves the housing market in uncertainty — no one knows how many trial modifications will ultimately be rejected, with the likely outcome that the owners will lose their home and the house will be thrust onto the already-saturated housing market. The most recent data on the administration's HAMP modifications show that only about one-third of 2 million modifications have been made permanent. Millions of other homeowners are engaged in proprietary bank modifications.

    Even as the bills and foreclosure notices piled up last year, Nielsen's office told the Schmalzes to keep making their trial modification payment in order to demonstrate their ability to satisfy the lowered obligation. Finally, in April, the Schmalzes got the good news they'd been dreaming about.

    "Essentially, we got a refinance," Ron Schmalz said. "But they could have done this at Day 1 for us. We're not upset with the result; we're happy with it. We're just upset with the process. We just don't understand why it took this long."

    That's the question nearly every observer of the housing market is asking about a potential recovery.

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