REGULATION: Wells Fargo Forbidden From Growing by Federal Reserve

Source: CNN Money

Source: CNN Money

In the legal tradition, civil courts can do one of two things: (a) make a party pay damages for injury resulting from a particular action by that party, or (b) prevent the party from taking an action in the first place through an injunction. Meaning, they can make you pay for your mistakes with money, or put you in time-out. The Federal Reserve has just put the entirety of Wells Fargo in time out by forbidding it from growing until it fixes the mistakes that led to its scandals (like opening 2 million fake accounts, aggressive sales tactics, etc). Wells has already paid $185 million in fines, so this is a cherry on top. The firm can add no more assets over the level it had at end of 2017.

This move is a potent reminder of sovereign power, and how it could be effectively used. All this noise about scams, fraud, crypto, and Ponzi schemes -- all this can hit a wall. Every exchange can be shut down. Every bank can be unlicensed. Sovereigns have teeth, and they should not be afraid to use them (for the right reasons of course). This is far easier to do with well regulated centralized entities, like one of the world's largest public banks; decentralized crypto may survive even such an attack. Other examples of sovereign power can be seen in the transformative European legislation of PSD2GDPR and MiFID II. These regulations force open bank data into accessible APIs that support fintech, create a personal right to be forgotten that forces a company holding your data to delete it, and separate investment research from trading to prevent inducements. 

Similar force could be used to deal with propaganda bots and the overreach of the big tech companies. We know that GAFA are dealing with millions of fake accounts (not unlike Wells). But these accounts manipulate information, public opinion, commercial outcomes and financial investment. From this point of view, Facebook's block of crypto-related ads is self protection, trying to prevent the system from being coopted for financial manipulation and regulatory response. See how the New York state Attorney General is going after the firm that manufactured fake accounts. We can also look at the healthcare alliance between Amazon, JP Morgan and Berkshire in this light -- a way to start remedying social unrest resulting from automation and increasing concentration of wealth, a first step to universal income.

One solution is fairly simple. Until Facebook, Google/Youtube and Twitter get their social news problems under control, they could be restricted from adding new accounts over the level of 2017 year end. Now that would be one way to fix the attention economy.