In 2019, congressional Republicans and Democrats have at least one thing they all seem to agree upon…none of them trust Facebook.
David Marcus, co-creator of Libra and head of Libra and Calibra, testified before Congress Wednesday about the goals of those who are developing Libra, the proposed digital currency of Facebook.
The hearing, which was live streamed over the Internet, largely consisted of congresspeople reiterating questions that have been brought up in the past about the stability of Libra as a digital asset, what kinds of KYC/AML and consumer protection measures would be applied to Libra, how it would conform to local, national, and international regulations – and, of course, how Libra users’ personal information would be protected. Representatives from both the Democratic and Republican party took part in the hearing; for once, it seemed like both parties agreed that launching Libra would be an unequivocally bad idea.
More than one House representative demanded straight yes-or-no answers from Marcus, whose responses often sidestepped clear answers to the representatives’ more dire inquiries in favor of drab corporate guff. When Bill Huizenga (R-MI) asked Marcus if the stability of Libra’s value could be affected by the level of the public’s trust in it, Marcus immediately answered, “…yes and no.” Huizenga laughed. “You’d fit perfectly into Washington,” he told Marcus. “A ‘yes’ and a ‘no’ without any hesitation!” When Madeleine Dean (D-PA) asked if Facebook had shared user data in an unauthorized way, Marcus again offered a nebulous response. “So that’s a ‘yes,’ then,” Dean said, continuing to her next question as Marcus attempted to sputter an explanation. When Alexandria Ocasio-Cortez (D-NY) asked Marcus if he thought that Libra, a currency run solely by an “un-democratically elected coalition of largely massive corporations,” should exist for the public good – or if currency itself should exist for the public good – Marcus responded again and again with the same vague platitudes, saying that “sovereign currency should stay sovereign,” and that Libra did not wish to challenge that norm.
It was clear that members of Congress didn’t buy that.
When Michael San Nicolas (D-Guam), vice chair of the House Financial Services Committee, asked Marcus what the projected average balance of Libra user accounts would be, Marcus said they had not made those calculations yet. San Nicolas was blunt in his incredulity: “You really expect me to believe that?” he said. “Facebook is built around average users, average number of hits – Visa, Mastercard, all these huge players are signing up and you guys have no idea what you expect to have in the average Libra account?”
San Nicolas referenced a post made by Marcus earlier this month in which he said the creators of Libra “firmly believe that if Libra is successful, it can be a non-linear step change for billions of people who need it the most.”
“I think that you’re actually trying to hide that figure,” San Nicolas said, “because when you actually do the math, it becomes very, very alarming…in your own posts, you mention ‘billions of users.’ So if we’re talking about $100 in a typical Libra account, you’re talking $100 billion…that’s money that’s being sucked out of the U.S. financial system and being put into whatever this kabal is putting together,” he said. “That many users and that many dollars means the U.S. is going to be disproportionately affected by Calibra and Libra. And once we impact disproportionately U.S. dollar demand by sucking dollars into Libras, interest rates will have to rise to attract dollar-denominating investors. Higher interest rates will injure the U.S. economy and U.S. jobs, higher interest rates – perhaps more importantly – will raise the financing cost of funding U.S. military operations and national security.”
Even some representatives who normally champion anti-regulation stances on economic issues agreed that allowing Libra to launch without oversight would be, at best, a questionable decision. David Kustoff (R-TN) pointed out that many Americans are less likely to trust a financial services organization like Libra which, although its product is marketed mostly to Americans, bases its operations overseas (in Switzerland). “Wouldn’t they more likely trust it if it were in the United States, and were in some way lightly regulated by the United States?” he asked. Trey Hollingsworth (R-IN) said Libra “looks more like a currency, so it should be regulated like a currency.”
Gregory W. Meeks (D-NY), chair for the subcommittee on customer security for financial institutions, assured Marcus that he did not believe Libra’s intent was necessarily malicious, but compared Libra with some of the worst economic disasters in history. “I can say with confidence that Lehman Brothers, Bear Stearns, and the entire subprime mortgage ecosystem did not set out to bring down the global financial system to its knees. I can say with confidence that the legitimately brilliant minds and noble prize-winners in fact behind LTCM did not set out to trigger the Asian financial crisis, but they nearly broke the global markets. And I can also say with confidence that [those responsible for] the de-regulation of the early 1980s and bankers did not set out to trigger the savings and loans crisis…but they did.”
Meeks also pointed out that Libra’s stated goals – to improve the efficiency of the global financial system and improve global financial inclusivity – were similar to those of the institutions he was talking about. “They all typically founded their logic in innovation, expanding access to financial services, and arguments of inclusion…and yet, they all broke the system. And the people at the bottom of the social/economic ladder systemically paid the heaviest price. So you may be speaking earnestly when you speak of your 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. Now, I don’t expect you to understand what that was like, but I assure you, it was absolutely terrifying.”
Marcus assured Congress that “[Libra] will not launch until we have addressed all concerns.” If that’s the case, the way things look right now, it’s possible Libra might not launch at all, at least in the U.S….and that might be a good thing.