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Hacked Off: So much for mobile banking. The Dutch company Gemalto, the world's largest maker of SIM cards for mobile phones, was hacked by a joint team from the National Security Agency and the U.K.'s counterpart intelligence agency. (The report comes from documents leaked by NSA whistleblower Edward Snowden to the website The Intercept.) Gemalto sells its SIM cards to AT&T, Sprint, T-Mobile, Verizon and other telecom companies. Gemalto's financial institution clients include Visa, MasterCard, American Express, JPMorgan Chase and Barclays. The U.S.-U.K. hackers stole encryption keys used to protect mobile-phone communications that are supposed to be private. If the report is true, then the privacy of any communications handled over mobile devices has been compromised, experts told The Intercept. The development is "bad news for phone security. Really bad news," a Johns Hopkins University cryptology specialist said. Gemalto confirmed to the Wall Street Journal that it's investigating the alleged breach, and the official statement from the company indicates it was totally in the dark about its systems being hacked. "We … had no prior knowledge that these agencies were conducting this operation," Gemalto said in a statement. In somewhat-related news, the NSA apparently finds it more difficult to play defense than to play offense. The State Department for three months has tried — and thus far failed — to eject hackers from its unclassified email system. The NSA has tried to remove the hackers, but it keeps seeing signs the hackers have slightly tweaked their spying tools to go undetected. The hackers are believed to have only been able to access unclassified email, which leads investigators to think the Russians are either trying to send the U.S. a message, or they sent their "B-team" hackers.

Wall Street Journal

The outgoing Postmaster General may think it's a bad idea for the U.S. Post Office to delve into financial services. But the Postal Service's inspector general has publicly stated his support for a public-private partnership between the Post Office and banks. And now the American Postal Workers Union wants to expand its offerings to include financial services. The union said it hopes incoming Postmaster General Megan Brennan will listen to its pitch. The union plans to offer its idea during contract negotiations, which began this week in Washington.

Google is getting a taste of how difficult it may be to compete with Apple on mobile-payments. Google is making changes to its Google Wallet product, in order to keep pace with the popularity of Apple Pay. However, the nature of Google's approach and platform makes that tricky, at best. For one, Google does not maintain nearly the same level of control over the phones that use its Android operating system as Apple does over its mobile phones. For another, Google has to make changes by negotiating compromises with the multiple companies with which it partners on Google Wallet, like Samsung, which has its own separate plans for payments. "Imagine trying to do this with several different companies," Apple CEO Tim Cook said at a recent conference, talking about how the company developed Apple Pay. "You'd be pulling your hair out." Google is also having to wring fees out of banks and other financial services companies, in the same way that Apple convinced banks to pay it a small fee for each transaction handled on Apple Pay. Google is in talks with Visa, MasterCard and unnamed banks to secure a similar deal, an anonymous source told the Journal.

The Journal's lead take on the adverse ruling against American Express in an antitrust case is that CEO Kenneth Chenault rolled the dice and lost big. But the same article notes it's not necessarily a lost cause for Amex, as the credit card giant can and will appeal the ruling, which said the company cannot ban retailers from promoting other credit cards or offer certain discounts. Furthermore, the judge who issued this week's ruling asked both sides to submit proposed remedies to the situation.

Visa has followed MasterCard in saying it will transfer the processing of transactions made on its cards in Russia to a local payment system.

Financial Times

Sen. Elizabeth Warren and equity shareholders may want to see the biggest banks broken up, as a way to unlock value. But executives at the largest banks may have a very powerful ally in their attempt to maintain the status quo and keep the sprawling financial institutions intact: bondholders. The owners of corporate bonds in firms including JPMorgan, Citigroup and others prefer the huge banks not be split apart, because they then won't have the "fortress balance sheet" to protect it from a collapse in the event of another London whale-type episode. The FT quotes an analyst at CreditSights, who says, after a careful reading of JPMorgan's bond covenants, bondholders likely have an effective veto if a proposal were made to break up the megabank.

Elsewhere ...

Bloomberg: Considering the difficulties of fighting hackers, JPMorgan Chase has apparently decided to build its own army to defend against hacks. JPMorgan has "built a vast security operation" and is staffing it largely with ex-military personnel. Its cybersecurity team is even based near the NSA's headquarters at Fort George G. Meade in Maryland, so it can more easily recruit military experts. Consider this, too: JPMorgan's cybersecurity team so far numbers 1,000 employees — twice the size of Google's cybersecurity team. JPMorgan's hires include the former head of the U.S. Air Force's cybercombat unit, and the cybersecurity expert Condoleezza Rice used when she headed the National Security Council.

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