The House Financial Services Committee held a hearing entitled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors”. The hearing had only one witness, Mark Zuckerberg, Chairman and Chief Executive Officer of Facebook. The fact that Facebook, a social media network, has such an impact on financial services and housing shows just how much reach Zuckerberg’s social network has. Facebook’s digital currency, Libra, was mentioned repeatedly, but so was Facebook’s enormous power and reach.
Zuckerberg showed Facebook’s enormous reach when he stated that more than one hundred billion times daily something is shared on Facebook.
Maxine Waters is a Democrat from the State of California, and she chairs the committee.
“Facebook’s plans to create a digital currency, Libra, and a digital wallet, Colibra, raise many concerns relating to privacy, trading risk, discrimination, opportunities for diverse owned financial firms, national security, monetary policy, and the stability of the global financial system,” Waters said during her opening statement.
Waters said Facebook already has many problems to deal with.
“On competition and fairness, Facebook is the subject of an anti-trust investigation by the attorney’s generals of forty-seven states and the District of Columbia. On protecting consumers, Facebook was fined $5 billion by the Federal Trade Commission for deceiving consumers and failing to keep their data private. On elections, Facebook enabled the Russian government to interfere with our elections in 2016 with ads designed to pit Americans against each other, suppress the vote, and boost Trump.”
She continued, “each month 2.7 billion people use your products; that’s over a third of the world’s population. That’s huge. That’s so big that it’s clear to me and anyone who hears this list that perhaps you believe you are above the law and are aggressively the size of your company and are willing to step over your competitors.”
Waters also suggested that Facebook needed, to be broken up.
On this, she agrees with Elizabeth Warren, the Democratic Senator from the State of Massachusetts, and Democratic candidate for president.
On October 1, Warren tweeted, “What would really ‘suck’ is if we don’t fix a corrupt system that lets giant companies like Facebook engage in illegal anti competitive practices, stomp on consumer privacy rights, and repeatedly fumble their responsibility to protect our democracy.”
Patrick McHenry is a Republican from the State of North Carolina, and the ranking member- or head of the minority- on the committee.
He took a more nuanced approach.
“Technology has led to greater prosperity, more freedom of expression, and the ability to transcend the limits of space and time to connect us to one another,” McHenry said in his opening statement, “but we know there is also a downside to all of this. The vitriol on social media is frightening. The growing inequality between those that have access to latest tech gadgets remain on the coasts, while those living in rural America are still trying the same connectivity to compete in a global marketplace.”
He called this hearing, “a trial on innovation.”
He continued, “it’s not about Libra; it’s not just about some housing ads. Maybe, it’s not really about Facebook at all. Maybe, it’s about that larger question, and fair or not fair, you are here to answer for the digital age.”
Zuckerberg, in his opening statement, said that Libra is designed to help those who are undeserved by the current banking system.
“As we sit here, there are more than a billion people around the world who don’t have access to a bank account but could through mobile phones if the right system existed; that includes fourteen million people right here in the US. Being shut out of the financial systems have real consequences for people’s lives, and it’s often the most disadvantaged people who pay the highest price. People pay far too high a cost and have to wait far too long to send money home to their families abroad.”
He called the financial industry “stagnant” and “there is no digital financial architecture to support the innovation that we need.
“I believe this problem can be solved and Libra can help. The idea behind Libra is that sending money should be as easy as sending a message.” Zuckerberg stated.
Zuckerberg also promised that Facebook would not participate in Libra until all appropriate US regulators had a chance to provide regulations to it.
But he faced bi-partisan scepticism on all points.
Brad Sherman is a Democrat from the State of California. He has long been a critic of crypto-currency.
He took aim that the goal of the Libra is to help the under banked.
“For the richest man in the world to hide behind the poorest people and say that’s who you’re trying to help. You’re trying to help those for whom the dollar is not a good currency: drug dealers, tax evaders, terrorists.”
McHenry asked Zuckerberg why the Libra is headquartered in Switzerland.
“I think Switzerland has certainly been forward leaning on systems like this,” Zuckerberg said.
When McHenry asked, rhetorically, if the US was not as forward leaning, that question was not answered directly.
Libra is technically a separate entity; it is a project of more than a dozen private and non-profits, but most of the legislators did not make a distinction and view Libra is being directed by Facebook.
Carolyn Maloney is a Democrat from the State of New York and she was skeptical that Zuckerberg would work with all regulators, noting that the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of Currency, the Securities and Exchange Commission, the Commodities Futures Trading Commission, and FinCen, as all potentially having oversight over Libra.
On that point, Congresswoman Nydia Velazquez is a Democrat also from the State of New York, and she asked for Zuckerberg’s commitment to wait on Congress, before moving forward.
Zuckerberg argued that Congress has oversight over the regulators, but this was not good enough for Velazquez.
“So, that is a no,” Velazquez stated after Zuckerberg said he felt their oversight over the regulators was enough.
On that point, Sherman stated that he believed that Facebook, and its team of lawyers, would use loopholes in old outdated laws to do as it pleases while technically complying with regulations.
Ann Wagner is a Republican from the State of Georgia and she asked why many members of the Libra Association have dropped out.
She noted that the original consortium included twenty-eight companies but “in recent weeks many of these founding members have dropped out of the association.”
PayPal, Visa, MasterCard, Stripe, Bookings Holdings, and eBay, were all mentioned by Wagner as having dropped out.
“This project is too big for any one company to do on its own,” Zuckerberg answered, “It’s a risky project; there’s been a lot of scrutiny.”