The bank of Facebook?

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Lawmakers question whether social media should have its own currency

David Marcus at a House Financial Services Committee hearing on Wednesday Associated Press/Photo by Andrew Harnik

WASHINGTON—Republicans and Democrats joined forces Tuesday to grill Facebook on Libra, its new digital currency project.

The social media giant unveiled plans for the new, bitcoin-like digital currency on June 17, claiming Libra would make sending money around the world as easy as sending a photo. To use Libra, users would have to link to their bank accounts to transfer money. They would also only be able to make purchases on websites or stores that accepted Libra as payment.

Facebook explained that an independent, Swiss-based council would oversee administration of the currency. To counter the instability that has affected other cryptocurrencies like bitcoin, a bundle of financial assets, including real-world currencies such the U.S. dollar and the euro, would back Libra.

In public hearings on Capitol Hill Tuesday and Wednesday, lawmakers questioned whether Facebook should be trusted to join the cryptocurrency sphere after its record of mishaps, from user privacy breaches to its failure to squash disinformation campaigns. They also raised concerns about Libra’s potential to disrupt the financial industry and the company’s motives for expanding its influence in people’s lives.

“Facebook has demonstrated through scandal after scandal that it doesn’t deserve our trust,” said Sen. Sherrod Brown of Ohio, the highest-ranking Democrat on the Senate Banking Committee. “We’d be crazy to give them a chance to let them experiment with people’s bank accounts.”

Sen. Martha McSally, R-Ariz., put it even more bluntly: “I don’t trust you guys. Instead of cleaning up your house, you are starting a new business model.”

In the hot seat, Facebook cryptocurrency chief David Marcus emphasized that Facebook would be just one of 28 companies in the Libra Association. So far, members include Uber, Mastercard, PayPal, eBay, and Visa. The company hopes to have about 100 members before Libra’s launch. Marcus also explained that Calibra, Facebook’s application that would allow users to send Libra, would only share customer data with Facebook or third parties with user consent.

Marcus said Libra would not go live until it had assuaged regulatory concerns. “We know we need to take the time to get this right,” he said, adding that the Libra Association “has no intention of competing with any sovereign currencies or entering the monetary policy arena.”

Facebook said it solicited feedback on the project from the Federal Reserve, the Treasury Department, and the Commodity Futures Trading Commission. But Federal Reserve Chairman Jerome Powell voiced concerns over Libra’s ability to handle “money laundering, consumer protection, and financial stability.”

President Donald Trump took to Twitter on June 11 to criticize cryptocurrencies at large, calling them “highly volatile and based on thin air,” adding, “if Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking regulations.”

Sen. Brian Schatz, D-Hawaii, is considering introducing a bill to prohibit “reserve-backed digital currencies,” Politico reported. But Sen. Patrick Toomey, R-Pa., said lawmakers should not rush to “strangle [Libra] in the crib.” He urged them to consider benefits as well as concerns, saying, “I think there are tremendous potential benefits in blockchain technologies and cryptocurrencies.”

One of Facebook’s reasons for introducing Libra, according to Marcus, is to introduce a “simple global currency and financial infrastructure that empowers billions of people.” He also noted that currently, more than 1.7 billion people are “unbanked.”

Education Secretary Betsy DeVos Associated Press/Photo by Alex Brandon

Public information

The House Oversight and Reform Committee on Monday demanded Education Secretary Betsy DeVos hand over by July 29 documents related to her use of personal email accounts to conduct government business.

Committee Chairman Elijah Cummings, D-Md., wrote in a letter to DeVos that he had new information that she and other Education Department officials used personal email in violation of laws regarding the proper preservation of government communications. “This new information also indicates that you withheld from the Committee information it has been seeking on a bipartisan basis over the past two years,” he wrote.

Earlier this year, a report by the Department of Education’s inspector general found that 78 percent of the department’s political appointees used personal email or text messages in “limited circumstances” for government business. DeVos told the inspector general she did not regularly use personal email accounts and when she had, she would forward the messages to her government account.

“The secretary’s emails related to government business were not always being properly preserved,” the inspector general reported, but most of the emails affected were “generally from individuals congratulating the secretary on her confirmation or providing her with recommendations on staffing at the department and advice on her new position.”

The use of personal email accounts to conduct official business became a major issue in the 2016 presidential campaign amid concerns about whether Democratic Party nominee Hillary Clinton sent classified information over a private server as secretary of state. During the campaign, Donald Trump frequently derided Clinton about the emails, but members of his own administration, including Ivanka Trump and Jared Kushner, have faced questions about their own use of personal email accounts. —Anne K. Walters

Education Secretary Betsy DeVos Associated Press/Photo by Alex Brandon

This week in Congress

In the House of Representatives

On Monday, White House counselor Kellyanne Conway defied a congressional subpoena and skipped a House Oversight and Reform Committee hearing to which she had been summoned. Senate Minority Leader Chuck Schumer, D-N.Y., voiced support on Tuesday for a bill to study reparations for slavery. On Wednesday, lawmakers voted 419-6 to repeal a steep Obamacare tax that was set to take effect in 2022. The 40 percent tax on high-cost insurance plans was supposed to be a key way to pay for the healthcare law. The House voted Thursday to raise the federal minimum wage from $7.25 an hour to $15 an hour by 2024. The measure passed 231-199. Coming up: Expect an intraparty fight over the Democratic Party’s stance on Israel in the coming days. Rep. Ilhan Omar, D-Minn., introduced a resolution in support of the boycott, divestment, and sanctions movement that seeks to punish Israel financially. Her move is in response to pro-Israel legislation, including one opposing the BDS movement that moderate Democrats have sought to bring to the floor. Also on tap: House Speaker Nancy Pelosi, D-Calif., and Treasury Secretary Steven Mnuchin are working on a deal to raise the debt ceiling and avoid billions in automatic spending cuts set for September. Congress is trying to pass something before the August recess, which runs July 26–Sept. 9.

In the Senate

On Tuesday, the Senate ratified a tax treaty with Spain by a 94-2 vote. The accord updates rules to reduce taxation rates on multinational companies that operate in both the United States and treaty partner nations. The Senate ratified three other tax treaties with Japan, Luxembourg, and Switzerland on Wednesday. Lawmakers confirmed Peter Joseph Phipps as a judge for the 3rd U.S. Circuit Court of Appeals by a 56-40 vote on Tuesday. On Thursday, the Senate voted to confirm Clifton L. Corker as a judge for the Eastern District Court of Tennessee, Lynda Blanchard as U.S. ambassador to Slovenia, and Donald R. Tapia as U.S. ambassador to Jamaica. —H.P.

2020 update

The latest fundraising numbers for 2020 Democratic presidential hopefuls revealed a $6 million gap between the top five candidates and the rest of the pack. Mayor Pete Buttigieg of South Bend, Ind., was in the lead with almost $25 million raised from April to June, while former Vice President Joe Biden and Sens. Elizabeth Warren of Massachusetts, Bernie Sanders of Vermont, and Kamala Harris of California all raised more than $11 million. None of the other candidates topped $5 million.

New York Mayor Bill de Blasio not only landed in the latter category but also faced criticism over his handling of a power outage in the city Saturday night. The New York Post published an editorial calling for Gov. Andrew Cuomo, also a Democrat, to remove de Blasio from office, pointing out that the mayor was at an Iowa campaign event while part of Manhattan was without power. “Bill de Blasio does not care about New York City. He does not care about its people,” the Post wrote. The New York Times also ran an article Sunday with the headline: “The Power Went Out. Where Was de Blasio?”

On the Republican side, President Donald Trump may soon have a challenger: Former U.S. Rep. Mark Sanford of South Carolina told CNN on Tuesday he would spend the next month exploring the possibility of running for the GOP nomination in 2020. Sanford’s office released a video Thursday morning in which he criticized Trump’s fiscal policies. Trump’s only other opponent so far is former Gov. Bill Weld of Massachusetts. —Kyle Ziemnick

Treasonous tech?

President Donald Trump tweeted Tuesday that his administration “will take a look” at billionaire investor Peter Thiel’s claims that Google’s work in China was “seemingly treasonous.” In a speech in Washington, Thiel said the FBI and CIA should ask Google whether its research on artificial intelligence was “thoroughly infiltrated by Chinese intelligence.”

A top Trump supporter from Silicon Valley, Thiel also criticized Google for allowing a U.S. Defense Department contract to lapse while at the same time cozying up to China. In his tweet, Trump called Thiel “a great and brilliant guy who knows this subject better than anyone.”

Google spokeswoman Riva Sciuto denied the accusations Tuesday ahead of a House Judiciary Committee hearing on the market power of Big Tech.

Last year, Google received criticism after The Intercept reported that the company had been working on a censored version of its search engine for the Chinese government. Known as Project Dragonfly, the technology would have censored searches on topics such as democracy and human rights. After an international outcry, Google announced it had terminated Project Dragonfly. —K.Z.