Wells Fargo’s Big Crack-up


The stage coach lands in the ditch. It’s nuts, the sheer scale of this story: Since 2011, Wells Fargo employees created 1.5 million bogus bank accounts and another half a million fake credit card accounts to meet sales quotas and earn incentives (The Wall Street Journal). They signed people up for these accounts, and even moved money into them, without customers’ knowledge or consent. As these practices began to be investigated by Los Angeles prosecutors and federal regulators, the bank ended up firing 5300 employees, or about one percent of its workforce. Wells Fargo was one of the few big U.S. banks to get through the big bank bust of 2007–8 relatively unscathed; now it has been fined $185 million by the Consumer Financial Protection Bureau (the watchdog agency set up after that banking collapse). Remember how hard some defenders of the banks fought to keep the CFPB from being established? Banks, they said, could regulate themselves. If that card ever worked, it just expired. Banking (and all business) depends on trust; the more stories like this people hear, the faster they will flee big old institutions and seek new alternatives.

Facebook plays the censor. If you were looking for a test case illustrating exactly why people argue with Facebook when it says things like “we are not a media company,” you couldn’t invent a better one: After someone posted Nick Ut’s famous Vietnam War photo of an anguished young girl running down the street after a napalm attack, Facebook took it down (The Guardian). The company told him to “remove or pixelize” it (the girl is naked). When he refused — he’d included it in a gallery of images that had “changed the history of warfare” — Facebook suspended him. In protest, many others reshared the image — among them, Norway’s prime minister. Her post was deleted, too. You can expect more follow-ups, reversals, and contorted press releases as Facebook tries to extricate itself from the mess it has stepped into. Policing online content boundaries is a challenging business, and the bigger you get, the harder it becomes. Facebook still has a lot of learning to do.

Machine intelligence will free up so much of our time! The question is, what will we do with it? The Economist’s Ryan Avent, who has a new book out, talks with The Atlantic about the difference between “abundance,” which sounds wonderful, and “overproduction,” which can lead to nasty outcomes like the Great Depression. Automation and intelligent systems will boost productivity and reduce demand for human workers, not only in manual roles like driving but in knowledge work like talking with customers. As that happens, expect a bumpy ride, says Avent: “It will involve intense ideological conflict, and history suggests that a lot will go wrong.” A universal income plan could help displaced workers make ends meet, but they’ll still yearn for the sense of purpose work once provided — and that may be a void even the most refined machine intelligence can’t fill.

China’s borrowing makes everyone else nervous. China’s debt load is $26 trillion — five times what it was a decade ago. For a lot of economists, that’s a red flag: Go into too much debt too fast and you’re looking for a crisis. At least that’s the theory, one that had people at Davos last January fearing that Chinese debt would be the next financial bust on the horizon. But maybe it’s not so bad, suggests Michael Schuman (The New York Times). China’s biggest borrowers are its large state-controlled corporations; if they get caught trying to roll over too much debt in the middle of a downturn, with profits dwindling and interest rates climbing, that could indeed be bad. But these firms have the government on their side, and that means a lot. Also, China’s companies and households save a lot more than those in the West, and it’s that savings which ends up getting loaned out; the whole process is mostly confined to China, and less subject to global pressures than in other countries. Worrying about China is probably unavoidable, but for most of us, there’s not a lot to do besides wait and see.

Is for-profit education the next bubble to pop? Rana Foroohar (Time) thinks it might be, after the recent shutdown of ITT Technical Institutes, coming on the heels of other high-profile meltdowns in the sector, including one that bore the name Trump. The for-profit schools make up only 12 percent of total higher-ed enrollment, but they account for 25 percent of federal student aid and fully half of student defaults. Running a school like a business might not itself be a bad idea — but financializing the institutions, turning them into aggressive marketing machines built on milking government programs, has ended up hurting students and destabilizing the entire education sector. Foroohar says the whole system needs a reboot.

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