Bank accounts caught up in red tape

Here are three of the week’s top pieces of financial insight, gathered from around the web:

Bank accounts caught up in red tape

A bank crackdown on fraud is sweeping up innocent customers, said Ron Lieber and Tara Siegel Bernard in The New York Times. Banks filed over 1.8 million “suspicious activity reports” (SAR) in 2022, a 50% increase from 2020. These reports start from “algorithmically generated alerts” that are reviewed by human employees and then filed to regulators. Banks are not legally allowed to notify customers if they are under suspicion, and multiple SARs often lead to the account’s foreclosure, sometimes without notice or explanation. One customer suspects Citibank closed his account because his “income comes as direct deposits from the cannabis company that recently acquired his employer.” And a JPMorgan Chase customer said the regular cash deposits from her restaurant caused the bank to shut her account.

Another windfall for WeWork’s founder

A surprising winner from WeWork’s collapse may be its infamously profligate founder, said Eliot Brown in The Wall Street Journal. Adam Neumann, the onetime chief executive of the office-sharing company, departed four years ago as a billionaire. Now, even with WeWork in bankruptcy, there is potential for further financial gain. In late 2019, SoftBank, WeWork’s biggest backer, loaned Neumann $430 million “that had a key feature: Neumann wasn’t personally on the hook for paying it back.” If he stopped paying, SoftBank would take his shares in WeWork. Today, with WeWork’s stock price near zero, “Neumann’s shares are currently worth $4 million, down from around $500 million in fall 2021.” Softbank executives worry Neumann “may simply walk away with the money he was lent and hand over the shares.”

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Mortgage rates head downward

Mortgage rates plunged last week by the biggest amount in a year, said Anna Bahney at CNN. The average rate on a 30-year fixed was 7.50% in the week ending Nov. 9, down from 7.76% the week before. The 26-basis-point drop was the largest in a single week since November 2022. “Mortgage rates tend to track the yield on 10-year U.S. Treasuries,” which dipped this month. The break for homeowners immediately triggered a 3% increase in home mortgage applications, though home sales remain way down this fall. “The monthly cost to buy a home has risen by over $166,” or 7.4%  compared with last year.

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