Zuckerberg makes his case to Congress; GAO opinion could help banks
Receiving Wide Coverage ...
Taking the heat
Facebook CEO Mark Zuckerberg told the House Financial Services Committee Wednesday that his company would “soldier on,” in the words of the Wall Street Journal, with its plans to create a cryptocurrency-based payments network, “despite requests from some lawmakers to mothball the project until Congress had a chance to examine it further.” However, “he pledged to refrain from participating in Libra’s launch anywhere in the world unless U.S. regulators approved of it.”
But Zuckerberg warned the lawmakers that China could step into the breach if Facebook is prevented from pursuing its project, the Financial Times reports. “China is moving quickly with the launch of a similar idea in the coming months,” Zuckerberg said. “Libra is going to be backed mostly by dollars and I believe that it will extend America’s financial leadership around the world, as well as our democratic values and oversight.”
“Despite occasional stumbles, Mr. Zuckerberg, surrounded at the hearing by a nearly full front row of Facebook lawyers, top lobbyists and public relations executives, stayed calm under the harsh questioning," the New York Times said. "He did what he was supposed to do as the chief executive of a big company called to heel in Washington. He took the heat.”
“The wide-ranging criticisms came largely from Democrats,” the Washington Post notes. But “Facebook’s efforts have catalyzed a rare alignment of opposition from the party’s members of Congress and some Trump administration officials, who are concerned Libra could trouble the global financial system.”
Zuckerberg's responses to questions “further cast doubt on the project’s future,” American Banker reports.
The FT offers five takeaways from Zuckerberg's testimony.
Wall Street Journal
Road to privatization
The Trump administration and Wall Street firms are “laying the early groundwork” for turning Fannie Mae and Freddie Mac back into private hands. “Before the two mortgage giants can be privatized, they will potentially have to raise billions of dollars from investors, a move that will require big banks to move further into a sticky political issue.”
Returning the two mortgage agencies to the private sector “could be a hard sell to investors. For example, the government still has a large ownership interest in the two firms from bailing them out, which could make potential investors reluctant to get involved. The government must also decide how much capital Fannie and Freddie need to stand on their own. The Federal Housing Finance Agency, which regulates the companies, said last year they would need to have as much as roughly $180 billion combined, but the regulator is currently deciding whether to propose new capital rules.”
PayPal is back in Wall Street’s good graces after the online payments company “said it is on track to at least hit the high end” of its revenue forecast range for this year, “at 15%, and then to resume its medium-term trajectory with 17% revenue growth next year. That should resolve some of the short-term fears around the company, which probably were overblown anyway,” the paper says. Back in July, the company’s stock tanked after it lowered revenue guidance. The stock jumped as much as 9% in after-hours trading Wednesday.
Two Democrats on the Senate Finance Committee, Ron Wyden of Oregon and Elizabeth Warren of Massachusetts, have asked the Federal Trade Commission “to investigate Amazon.com over concerns the company ignored security warnings about a vulnerability that enabled the hack of Capital One customer data in one of the biggest-ever heists of such banking records.” The senators said “Amazon had failed to protect its customers from a known security issue in its cloud-computing system, where Capital One stored the information.”
New York Times
Path to eased regulation?
The Government Accountability Office has “found that the Federal Reserve and other regulators had issued guidance to influence the behavior of banks in a way that is subject to congressional oversight. At least in theory, the agency’s decision will make it easier for Congress to relax regulations that were imposed after the 2008 financial crisis.”
The GAO was responding to a “request by five Republican lawmakers, led by Senator Thom Tillis of North Carolina, to examine the way the Fed had pushed banks to alter their conduct. The agency found that some of what regulators called ‘guidance’ actually amounted to official rules, which are subject to the Congressional Review Act. That law lets Congress overturn rules issued by federal agencies. The GAO opinion is the latest victory in a broad campaign by Republicans and the Trump administration to ease constraints on banks.”
“Federal regulatory agencies should not be using rules improperly to place unnecessary regulations on financial institutions, and I will continue to work with my colleagues to hold regulatory agencies accountable.” — Sen. Thom Tillis. R-N.C., commenting on a Government Accountability Office opinion that gives Congress greater oversight on bank regulations