“Both sides of the aisle came well prepared to ask significant questions,” said Rep. Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee.
“As a matter of fact, I believe that we had Members on our Committee today that went a lot deeper than many of those observing what took place today ever expected them to do.…I think we sent a message to them today that we are focused. We’re focused. We’re watching. We’re on it. We’re involved in it. We’re going to use all of our time learning everything we can about it and for those who say that we don’t have an appreciation for innovation. That’s not true. We have an appreciation for innovation but we don’t have an appreciation for those who have something masked simply as innovation that is a global effort for control of a currency….”
During the hearing, Chairwoman Waters pressed Facebook on whether it would agree to a moratorium on its activities to develop these new products until Congress has an opportunity to take action:
“Given its disregard for U.S. law and its massive scale, I think foreign countries could find it difficult to effectively regulate Facebook, Libra or Calibra. It isn’t clear the Federal Reserve or other U.S. regulators have the authority to regulate you, and yesterday the Swiss regulator that you’re saying would regulate you actually said that it has never been contacted by Facebook about this project. So Mr. Marcus, you responded to a request by Members of this Committee for a moratorium on your activities by stating that you would continue to work with regulators before going forward. But if the regulators lack the authority to adequately oversee you, how can you work with them to resolve concerns?”
“Will you stop kind of dancing around this question and commit here in this Committee, before the duly elected representatives of the American people, to a moratorium until Congress enacts an appropriate legal framework to ensure that Libra and Calibra do what you claim it is intended, which is to serve the public’s good?”
Click here for video of Rep. Waters’ closing statement, and herefor video of Rep. Waters’ Q&A.
Read below for 10 tough questions Committee Democrats asked the CEO to answer during the hearing.
Rep. Greg Meeks (D-NY), Chairman of the Subcommittee on Consumer Protection and Financial Institutions:
“You may be speaking earnestly when you tell us the lofty goals but I was here in Congress when Secretary Paulson came to us and told us we were within days of a complete shutdown of the global financial system. I don’t expect you to understand what that was like but I assure you it was absolutely terrifying and one of my worst moments in Congress. I want America to remain a global leader in financial services innovation and I believe that we have regulators, etc., who are the best in the world but let’s do this. Let’s assume that Facebook manages to get even just 10% of its current user base to the Facebook Libra wallet.”
“Do you understand that that would absolutely make you a systemically risky financial institution and that we would expect FSOC to designate you as such and the Fed to create a special regulatory oversight program for Facebook accordingly. Would you agree to this?”
“This is not an app that measures your heartbeat, this is a complete overhaul of the circulatory system of the global economy. So a lot of the concern you are hearing here I think is just around its sort of shocking ambition, and I want to ask you a specific question and take you through a specific scenario that gets at a larger concern that I have, and just so folks at home can kind of follow along, you know, let’s just imagine that I’m an American user of Libra and my rent is a $1,000 a month, and just for simplicity’s sake, let’s say that this month it’s a 1,000 Libra a month. Now, because Libra is backed by a basket of currencies, let’s just imagine that one of the currencies, sterling, devalues dramatically in two weeks. I think, if I recall my banking and economic days, that I will find that in the next month, my rent, in Libra, will be – let’s just pick a number - 1,100 Libra, but still $1,000 a month.”
“So, you know what I’m getting at; users will have the profoundly unfamiliar experience of assuming foreign currency risk, am I correct in that?”
Rep. Bill Foster (D-IL), Chairman of the Task Force on Artificial Intelligence:
“I’m worried about abusive self-custody. If I own the cryptographic code for a piece of Libra, do I own that Libra full stop or not?...Now if I go on the dark web and start offering to trade that, do you have any technical way of stopping me from doing that anonymously?”
Rep. Joyce Beatty (D-OH), Chairwoman of the Subcommittee on Diversity and Inclusion:
“I want to focus on one of the reasons, that I read that Libra gives us, for why we need a global currency, and that is to address the millions of unbanked and underbanked people in the world. Despite this claim, in response to a question at yesterday’s Senate Banking Committee hearing from Senator Brown, you stated that Libra is not designed to compete with bank accounts. Additionally you said in response to Senator Kennedy that Libra will not engage in banking.
“Can you tell me how Libra - banked and unbanked and underbanked – how you will work with them if it’s not meant to compete with the banking accounts, and if you’re not engaging in banking?”
“At the end of your press release, there is a disclaimer that states, ‘these forward looking statements may differ materially from actual results due to a variety of factors and uncertainties, many of which are beyond our control.’ In it you go on to admit that this is all ‘based on assumptions that you believe to be reasonable’ as of the date of this press release. Chairwoman, I ask for unanimous consent to submit to the record Facebook’s press release announcing the launch of Calibra.
“…So, yes or no? Would you trust your money with a company that essentially admits that it’s just winging it?”
“I believe we’re here today because Facebook, which is a publishing platform, an advertising network, a personal telecommunications network, a surveillance corporation, a content distributor, now also wants to establish a currency and act through its wallet as, at minimum, a payment processor.
Why should these activities be consolidated under one corporation?”
“What I’d like to do is, with the focus on the notion of trust, number one, say that I was dismayed by your comments that you said we don’t need to trust you – I think this was before the Senate – we don’t need to trust Facebook because there are 28 other partners, eventually 99 other partners in the association. No, we do need to trust you. We absolutely need to trust you. So before we look forward to the possibility of Libra, why don’t we look back, and take a look at the record $5 billion recommended fine against Facebook.”
“Could you be very specific, not euphemistic, but very specific as to the wrongdoing that generated a $5 billion recommended fine?”
Rep. Stephen Lynch (D-MA), Chairman of the Task Force on Financial Technology:
“The mantra of Facebook was “move fast and break things.” That was their mantra when they got into business.…I would add that they also have taken an approach to business that rather than ask for permission, they just apologize later and that’s what they have done over and over and over again with the personal data of their customers. Their commerce business model, and thank you for coming, is to really use an adhesion contract–eighteen pages–that basically authorizes Facebook to vacuum up the behavioral surplus –all of the information about their users– and then they sell it or they deploy it on behalf of their advertisers. That’s the model that you have, and I’m just worried that you are going to use the same model for Calibra.”
“What’s the terms of service agreement going to look like here? Is it going to be you click I agree and then all of your rights are gone, because that’s the model you have with Facebook, right?”
“You are going to take people’s U.S. dollars, give them something that you are going to call currency and you don’t call that banking activity.
“Do you call it money changing activity? Because we do have laws that apply to money changing
“…Respectfully, Mr. Marcus, this is not a personal thing at all, but I had the commitment of so many bankers in my lifetime that they would do the right thing by homeowners they foreclosed on that I have to have better than that. I just wanted on my last five seconds suggest that you check out 18 U.S. Code 486 which makes it a crime to create private money that it is metallic coin. I don’t see why that criminal statute doesn’t also inhibit the creation of digital coin.”