July 16, 2019

July 16, 2019

Facebook's Faltering on Libra. I previewed the week's hearings for Big Tech today on the website, and I wondered whether Silicon Valley would have any allies on Capitol Hill left. It turns out they have a few, but not nearly enough. 

David Marcus, a vice president of Facebook, testified at the Senate Banking Committee today about Libra, the proposed digital currency. And it became clear from the opening moments, when Sherrod Brown in his opening statement compared Facebook to a toddler playing with matches and committing arson, that Marcus was in over his head.

It took Marcus four asks from Brown on whether he would accept his own compensation in Libra before saying he would. Mike Crapo, the Republican committee chair and not exactly a knee-jerk anti-business zealot, pointed out a contradiction in Marcus' testimony: He stressed that Facebook must be allowed to create this currency or "some other country" (read: China) will, but Facebook set up the association for Libra in Switzerland, home of famously lax banking laws.

Republican Martha McSally bluntly said "I just don't trust you guys." Democrat Brian Schatz wondered why Facebook was starting on currency when it hasn't fixed all the other problems with its regular operations, perhaps out of "Silicon Valley grandiosity" and "boredom." Republican Pat Toomey, one of the more supportive senators, wondered how Libra could be called a nonprofit when the reserves would generate substantial revenue that would be distributed as dividends to initial investors. Democrat Kyrsten Sinema, perhaps the most pro-bank senator on that side of the aisle, laid out how Libra would be a paradise for scam artists. When the folksy John Kennedy cited the "flagrant displays of bullshit" on Facebook, the referee should have stepped in.

It was a bloodbath. Marcus was woefully unequipped to explain how Libra would comply with regulators, how it would prevent bank runs, or really anything beyond a surface level. After the hearing, Crapo said that Libra should be a catalyst for a comprehensive data privacy bill. The strong likelihood is that the currency never rolls out and the proposal spurs additional regulation on Facebook. Slick work, Zuck.