Can't get rid of crop lines around image in Photoshop (latest CC version)

I installed PS (25.11.0) on a new computer, long time user.

This is a brand new Photoshop installation, the only thing I did was set color preferences.

Every time I render an intermediate layer there are what look like blue crop lines around the image. If I pull on a handle a cropped version of the image is superimposed in a new layer while the original layer remains. If I press enter that smaller version of the image appears in its own layer.

The only way to get rid of the lines is to flatten the image.

They appear again as soon as I render an intermediate layer.

I've never seen this before, I can't find any way to get PS to display images on the desktop properly.

I see that the Free Transform tool is checked under Edit. There seems to be no way to turn this off (I never clicked it on).

I attached a screen shot of the nearly unusable PS desktop.