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Today, Prudential Financial announced it would suspend the distribution of a low-cost life insurance policy through Wells Fargo. The low-cost life insurance policy, called MyTerm, had been promoted by Wells Fargo since 2014 throughout its large number of retail banking outlets. The suspension comes shortly after a wrongful termination lawsuit was filed by three former Prudential employees, which alleged that Wells Fargo employees signed up customers for MyTerm life insurance policies without the customer’s knowledge to hit sales goals. The plaintiffs, who worked at Prudential’s corporate investigations division, claim their reports of the fraud led to their termination because Prudential management did not want to take any action that could damage its business with Wells Fargo. If true, those allegations would fit an already established pattern of Wells Fargo employees creating fake customer checking, saving, and credit card accounts. The resulting scandal from those revelations led to Wells Fargo being fined $185 million and the resignation of the CEO, John Stumpf. Wells Fargo is already facing a new investigation by the SEC concerning whether the bank made proper disclosures to investors. It’s not clear if the company disclosed the nature of the Commodity Futures Trading Commission investigation and others that led to $185 million in fines, or whether the company knowingly transmitted false sales numbers based on the gains from fake accounts.

Though it is hard to quantify, Wells Fargo’s name, reputation, and brand have been undeniably damaged. After the publicity of the congressional hearings, it is likely that many potential customers will not use the bank’s services. Customers whose names were used to open fake accounts will probably never bank with Wells Fargo again. In fact, some of them are suing. That’s all before whatever further damage is done by the more recent accusations about the fake life insurance accounts from Prudential. Hopefully not lost in all this is that the initial plan by Wells Fargo executives was to scapegoat low-level employees for this entire scandal. Despite creating the “cross-selling” program, which forced employees to aggressively try to open new accounts and even firing those that did not or complained about it, Wells Fargo upper management initially took no responsibility for the fake account scandal. In all, over 5,000 low-level employees have been terminated and are likely never going to work in banking again, while the CEO and the executive responsible for managing the program, Carrie Tolstedt, will walk away with millions upon millions of dollars.

Wells Fargo WFC -9.22%Wells FargoWFC$58.16$-5.91(-9.22%)As of 02/06/2018, 01:01am EST is facing far more than a fine for its fake accounts scandal, in which employees at the lender's branches across the country opened over a million fraudulent checking and credit card accounts to hit their numbers. Late on Friday, the Federal Reserve decided to restrict growth at America's third-largest bank by assets until its risk and governance is improved. The order, which also called for a revamp of Wells Fargo's board of directors, sent the bank reeling in early trading Monday. Wells Fargo shares plunged 9% lower in Monday trading, erasing most of its gains over the past 12 months. For its top shareholder, Warren Buffett's Berkshire Hathaway, the Fed-inspired stock slide meant its Wells Fargo holdings lost over $2.7 billion in value. "We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again," said chair Janet L. Yellen on Friday. The order was her last as head of the Federal Reserve. On Monday, successor Jerome Powell was sworn in. Added Yellen, "the enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers." In September 2016, Wells Fargo paid a $185 million fine to the Consumer Financial Protection Bureau after the agency found branch bankers had opened well over a million fake accounts, which generated millions of dollars in fees to the lender. When the scandal, which occurred over almost a decade, was first revealed, Wells Fargo and its board didn't immediately overhaul their leadership, or sanction top executives in the divisions where fake accounts were created. Only after significant public outcry, in addition to a widening scope of the scandal, did Wells Fargo begin a revamp, firing CEO John Stumpf and clawing back bonuses for numerous executives. Backer Warren Buffett later said in an appearance on CNBC the bank and its leadership had misjudged the severity of the problem.

In addition to harsh words, the Fed is ordering a sanction of almost unprecedented severity. It will restrict the bank's growth until its governance and risk management improve, though it will allow Wells to continue current operations from taking deposits to offering loans.

Three Wells Fargo long-standing board directors, John Chen, Lloyd Dean and Enrique Hernandez, will likely retire at the firm's annual meeting as part of the Fed's additional order for a refreshment of four board directors. Analysts did not brush off the Fed's move, as they have large fines coming out of the crisis.

Matt Taibbi writes in Rolling Stone about the economics behind college tuition. Interest rates get the headlines and the attention of politicians, but Taibbi says the real culprit is "appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008." He writes,

"For this story, I interviewed people who developed crippling mental and physical conditions, who considered suicide, who had to give up hope of having children, who were forced to leave the country, or who even entered a life of crime because of their student debts. ... Because the underlying cause of all that later-life distress and heartache – the reason they carry such crushing, life-alteringly huge college debt – is that our university-tuition system really is exploitative and unfair, designed primarily to benefit two major actors. First in line are the colleges and universities, and the contractors who build their extravagant athletic complexes, hotel-like dormitories and God knows what other campus embellishments. For these little regional economic empires, the federal student-loan system is essentially a massive and ongoing government subsidy, once funded mostly by emotionally vulnerable parents, but now increasingly paid for in the form of federally backed loans to a political constituency – low- and middle-income students – that has virtually no lobby in Washington. Next up is the government itself. While it's not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president's new federal student-loan system, an estimated $184 billion over 10 years, a boondoggle paid for by hyperinflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a "Save the Panda" charity. Why is this happening? The answer lies in a sociopathic marriage of private-sector greed and government force that will make you shake your head in wonder at the way modern America sucks blood out of its young."

One security start-up that had an encounter with the FBI was Wickr, a privacy-forward text messaging app for the iPhone with an Android version in private beta. Wickr's co-founder Nico Sell told CNET at Defcon, "Wickr has been approached by the FBI and asked for a backdoor. We said, 'No.'" The mistrust runs deep. "Even if [the NSA] stood up tomorrow and said that [they] have eliminated these programs," said Marlinspike, "How could we believe them? How can we believe that anything they say is true?" Where does security innovation go next? The immediate future of information security innovation most likely lies in software that provides an existing service but with heightened privacy protections, such as webmail that doesn't mine you for personal data.

Wickr's Sell thinks that her company has hit upon a privacy innovation that a few others are also doing, but many will soon follow: the company itself doesn't store user data. "[The FBI] would have to force us to build a new app. With the current app there's no way," she said, that they could incorporate backdoor access to Wickr users' texts or metadata. "Even if you trust the NSA 100 percent that they're going to use [your data] correctly," Sell said, "Do you trust that they're going to be able to keep it safe from hackers? What if somebody gets that database and posts it online?" To that end, she said, people will start seeing privacy innovation for services that don't currently provide it. Calling it "social networks 2.0," she said that social network competitors will arise that do a better job of protecting their customer's privacy and predicted that some that succeed will do so because of their emphasis on privacy. Abine's recent MaskMe browser add-on and mobile app for creating disposable e-mail addresses, phone numbers, and credit cards is another example of a service that doesn't have access to its own users' data.

Stamos predicted changes in services that companies with cloud storage offer, including offering customers the ability to store their data outside of the U.S. "If they want to stay competitive, they're going to have to," he said. But, he cautioned, "It's impossible to do a cloud-based ad supported service." Soghoian added, "The only way to keep a service running is to pay them money." This, he said, is going to give rise to a new wave of ad-free, privacy protective subscription services.

Update 2: Glenn Greenwald Goes on Record: “I Don’t Doubt PayPal Cooperates with NSA!”

The 50,000-pages of documents obtained by NSA whistleblower Edward Snowden contain extensive documentation of PayPal Corporation’s partnership and cooperation with the National Security Agency (NSA), according to three NSA veterans. To date, no information has been released as to the extent of the working relationship and cooperation between the two entities- NSA and PayPal Corporation. What’s more, the billionaire owner of PayPal Corporation has entered into a $250 Million business partnership with two journalists-Glenn Greenwald and Laura Poitras, a journalist duo who possess the entire cache of evidence provided by Edward Snowden. Despite earlier pledges by the journalists in question, only one percent (1%) of Snowden’s documents has been released. BFP was recently contacted by a retired NSA official who claims that the documents obtained by NSA whistleblower Edward Snowden contain extensive documentation pertaining to NSA’s partnership with major U.S. financial institutions, including credit card companies and PayPal Corporation. The official, who requested anonymity, also alleges that a deal was made in early June, 2013 between the journalists involved in this recent NSA scandal and U.S. government officials, which was then sealed by secrecy and nondisclosure agreements by all parties involved. Upon receiving this report BFP contacted three other high-level former NSA officials for additional information and comments.