Degrees of Separation

USC, Foster Care, RobinHood, BadgerDAO, and Capital One

USC

This week the New York Times published an article claiming millenials are dealing with inflation “for the first time”. Some people have pointed out that millenials are all too familiar with inflation, because the price of a college degree has gone up something like one thousand percent since they were born. Some colleges have taken advantage of for-profit marketing companies to sell expensive online graduate degree programs, like, for example, USC:

The nonprofit school used its status-symbol image to attract students across the country, including low-income minority students it targeted for recruitment, often with aggressive tactics. Most students piled on debt to afford the tuition, which last year reached $115,000 for the two-year degree. The majority never set foot on the posh Los Angeles campus but paid the same rate for online classes as in-person students.

Social work is a difficult, critical job in America, with scant resources dedicated to helping those in need. So, how does an online degree from a prestigious university work out for the graduates take on debt to earn it?

Recent USC social-work graduates who took out federal loans borrowed a median $112,000. Half of them were earning $52,000 or less annually two years later, a Wall Street Journal analysis of newly released U.S. Education Department data found. Compared with other master’s-degree programs at top-tier U.S. universities, the USC social-work degree had one of the worst combinations of debt and earnings.

Not great! Nor were their aggressive recruitment methods:

To attract students, USC employs a style of recruiting once rare at highly regarded universities, according to dozens of interviews with current and former students and employees. Recruiters for 2U Inc., a for-profit company that works with USC and others to develop online degrees, repeatedly call and email prospective applicants. Counselors sometimes recruited people with low grades to meet enrollment targets.

Lest we place the blame fully on a for-profit firm, staff at USC were directly involved:

The school formulated marketing campaigns to woo applicants, using demographic profiles of the kinds of students they would recruit, internal documents used by the marketing department and reviewed by the Journal show. The profiles include cartoon characters depicting potential recruits; in one depiction, a Black woman dubbed Needy Nelly “needs hand-holding” and “calls and emails everyone” because she has trouble with her application.

So, USC created an expensive, mostly online program to provide social work degrees required to get a job in the field, saddled them with debt thanks to free-flowing federal student loan programs, and spat them out into a field where they couldn’t expect to make enough to pay it off. USC is one of the top 20 richest universities in the country, with a nearly $6 billion dollar endowment. Using their reputation to turn social work - of all things - into a profit center for a school that doesn’t need the money is a good illustration of how our system of higher education has become deeply broken.

Foster Care

Social work is a noble pursuit, even for the heavily indebted. However, many of them are thrust into a system that is badly broken - underfunded, under-resourced, and mismanaged by the states. ProPublica published a deep investigative study of the “shadow” foster care system in America. First, here is how standard foster care works:

In the traditional child-welfare system, caseworkers investigate reports of mistreatment to make sure a child is safe. The department must try to keep children at home, but if staff members find that the danger is too great, they file for legal custody. In hearings in family court, where children and low-income parents are generally offered free lawyers, judges decide whether children should be absorbed into foster care. They oversee the placements and determine how long children should be separated from their parents. Foster care is paid for by federal, state and sometimes local funds; caseworkers are required to regularly check on children and register updates for a national database. Because keeping the family intact is almost always the long-term goal, child-welfare departments are then responsible for trying to stabilize the family, offering services like anger management and addiction treatment. Only a judge can terminate a parent’s rights.

All of this sounds rational, and designed - on the surface - to take child and parental welfare into account. So, what’s the shadow system like?

But over the past decade, states have increasingly institutionalized hidden foster care, through statutes and departmental policies. Rather than bringing the results of an investigation before a judge, caseworkers persuade parents to send their children to live with someone they know, often by threatening a foster placement if they refuse. Parents, unsure whether caseworkers have the evidence to remove their children in a court proceeding, choose the option that, at first glance, appears to give them more control.

What the parents rarely know is that, unlike the foster system, the shadow system is not designed to support their children. The government isn’t required to ensure the safety of placements with the thorough home visits and health screenings that federal law requires with foster care. Relatives or family friends, often under pressure to take children into their homes, don’t receive a boarding fee to raise them; they usually don’t even have the legal authority to enroll them in school or take them to a doctor. In many states, departments simply close the cases, ending the assistance that child-welfare workers can provide. Because nobody monitors the children after they are moved, it’s impossible to know what happens to them while no one is watching.

This is, to put it mildly, a much worse system. How pervasive is it?

A quarter of a million children are taken into formal foster care every year, and by the best estimates, roughly the same number are moved into this shadow system, which child-welfare departments call “kinship diversion” or “voluntary kinship placements,” among other names. Most states don’t track how many children they divert, but in Texas alone, government workers entered into about 34,000 safety-plan placement agreements in 2014, significantly more than the number of removals into the formal system.

So, an estimated quarter million children each year are taken out of their homes and placed with family friends or relatives, with very little or no monitoring at all. This is a stark example what can happen in a society that doesn’t provide funding for child health care, mental health services, or working parents. The shadow system originated - like so many of our awful social policies - under Reagan:

Under President Ronald Reagan, funding for a range of family programs was cut, and child-protection services emerged as a key source of support. But the interventions focused on individual responsibility rather than long-standing social inequities. By then, the definition of child abuse had broadened to include psychological harm like “emotional neglect” and “mental injury.” States were adopting universal mandatory-reporting laws, requiring every adult to call in if they suspected intentional harm to children. The child-welfare system had once focused on prevention, but deluged with allegations, it morphed into an investigative agency.

Essentially, government cut family programs, and states - in a near constant cycle of moral panic - adopted mandatory reporting laws which led to huge numbers of complaints filed by teachers, caregivers, or concerned relatives. This overwhelmed the foster system, which was already short on foster families, and so caseworkers did what they could - placing children with friends or relatives rather than taking cases to court.

In the 1990s, when both political parties embraced the slashing of the social safety net under the guise of personal responsibility, states utilized the shadow system as a way to save money:

In 1996, Congress started requiring states to consider relatives before strangers when placing a child in foster care. If those relatives became licensed foster parents, states had to pay them the same amount they paid strangers. But caseworkers encouraged families to bypass the courts altogether, which allowed states not to pay…

The stories in the piece are heartbreaking - parents into signing custody agreements under legal threat, children whose lives were forever upended as they bounced around different homes, and even more horrific outcomes. In a week when a Supreme Court Justice blithely suggested women should carry unwanted pregnancies to term, it’s worth taking a hard look at the system many of those hypothetical children would end up in.

RobinHood

Last month, online brokerage RobinHood disclosed that it had suffered a breach that exposed data on 7 million customers to hackers. So, what happened?

Vishing:

The call was coming from inside the company.

Or so it seemed when the mobile phone of a customer-service representative for Robinhood Markets Inc. lit up on the evening of Nov. 3. More than an hour passed -- on and on the conversation ran, as the caller reeled in the hapless employee.

By the time it was over, that one Robinhood rep had unwittingly handed over keys to the personal information of about 7 million customers, in what’s now believed to be one of the biggest retail brokerage cyber-breaches of all time, by number of accounts affected.

Oops! The irony here is RobinHood has been criticized for its lack of customer service in the past, and its attempts to staff up created conditions perfect for a hacker to exploit:

In one example, a group of managers expressed trepidation over the company’s decision to move to 24/7 phone support for all customer queries, fearing the team wasn’t ready, according to one of the people…

We sometimes talk about tech companies trying to use technology to solve problems rather than simply hiring people, but sometimes tech companies do hire people, and that creates a whole new set of problems.

BadgerDAO

But! Often, the tech is the problem:

Notably, the hack did not involve complicated smart contract exploits. Instead, it was a front-end attack targeting BadgerDAO's web infrastructure, in particular its Cloudflare account, BadgerDAO’s content delivery network. When interacting with BadgerDAO using a Metamask wallet, users were confronted with illicit permission requests. Users noticed the attack when they saw that their wallets were being emptied, and BadgerDAO then “paused” all smart contracts.  

A thing called BadgerDAO had $119 million in crypto stolen from its DeFi platform this week. A lot of crypto people talk about “web3” these days, using it as a catchall term for decentralized finance and blockchain and whatever, but in Badger’s case it was a failure of web1 technology, namely the security systems - or lack thereof - they built the platform on. When RobinHood got hacked, they stole 7 million emails and phone numbers. When BadgerDAO got hacked, they stole $119 million in irretrievable funds. If web3 really is the future, we may not be there yet.

Capital One

Normally when I write about a bank, it’s about something bad the bank has done or is doing. Capital One has done sketchy things in the past, but now it has done a…good? thing:

Capital One Financial Corp. said it will stop charging customers overdraft fees, making it one of the largest banks to do so. 

The fees, which are charged when customers don’t have enough money in their accounts to cover payments, are a source of income—and criticism—for banks.

I can’t emphasize enough what a scam overdraft fees are. They are used to punish and profit off low income accountholders - by design! It’s free money for banks, who make billions a year off arbitrary fees. To make matters worse, overdrafts leading to account closures contributes to people being added to punitive “blacklist” databases like Chexsystems so they can’t open accounts at other banks.

Capital One made $150 million dollars off overdrafts last year, though it’s being coy about why it’s ending the practice:

Capital One didn’t give a reason for why it is scrapping its fees now. In a letter to employees, Chief Executive Richard Fairbank said Capital One wants to reimagine banking and help customers succeed.

Hmmm, I might have an idea why:

The Consumer Financial Protection Bureau said on Wednesday that it would begin closely examining banks that had an outsize reliance on overdraft fees, the much-maligned charges that turn $3 coffees into $38 gotchas.

[…]

The bureau did not identify any banks it may be targeting, but Mr. Chopra said it had asked its examiners to focus on banks that rely heavily on overdraft fees.

Well, whatever. Even if it’s a bit cynical, Capital One eliminating overdraft fees is a big deal, especially if it triggers other large banks to follow suit. Overdraft fees dropped precipitously - almost $5 billion - in 2020 because the government made it rain stimulus payments, but as the money runs out and we enter the holiday season, banks will be back on the overdraft teat to juice their already record profits.

Short Cons

Bloomberg - “The detention of Suncity Group Holdings Ltd. CEO Alvin Chau marks the first time such a high-profile figure in the gaming industry has been targeted. Macau’s judiciary police said Sunday that Chau confessed to establishing overseas gambling platforms and carrying out illegal virtual betting activities.

Philly Inquirer - “This all helped eclipse reports of his past convictions for running a $14 million mortgage scam and an unlawful offshore gambling operation.

Bloomberg - ““You know, you crack the doors open and it’s something completely different than we were expecting. So it’s a challenge. You’re thinking, ‘Right, where can I send this? What can I do with this?’”

BankInfoSecurity - “Criminals have been selling fake vaccine certificates online and may be able to fool an EU system designed to verify the certificates' validity, researchers warn.

Tips, thoughts, or news of banks eliminating predatory fees to scammerdarkly@gmail.com

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