Mark Zuckerberg arrived on Capitol Hill to push an optimistic vision of Facebook’s planned digital currency and its potential benefits to those around the world who don’t have access to bank accounts, but was quickly grilled Wednesday over issues confronting the social media giant.
The Facebook CEO appeared before the House’s financial services committee, his first testimony to Congress since April 2018, on the company’s plan to create Libra, which has stirred opposition from lawmakers and regulators in the U.S. and Europe.
Facebook has encountered criticism on several fronts recently, from its shift into messaging services that allow encrypted conversations to its alleged anticompetitive behaviour to its refusal to take down blatantly false political ads or doctored videos.
“I get that I’m not the ideal messenger for this right now,” Zuckerberg said in his opening remarks.
Maxine Waters, the California Democrat who heads the panel, this summer asked Facebook not to move forward with the currency and a digital wallet called Calibra that would be used with it. Waters has called Libra “a new Swiss-based financial system” that potentially is too big to fail and could require a taxpayer bailout.
In her opening remarks, Waters also said Facebook has “utterly failed” to cultivate a diverse workforce, despite pledges in recent years to improve percentages of women and minorities.
She also questioned Zuckerberg over the millions of dollars it was taking in for political ads that were misleading or untruthful, getting him to admit that ads on Facebook are usually only heavily scrutinized or rejected after they are posted and receive criticism.
Zuckerberg, as he had in an address last week in Washington, D.C., argued that “political speech is among the most heavily scrutinized type of speech,” and that voters should be able to judge the messages of politicians.
Republicans more receptive
Republicans and Democrats, as well as top regulators — including Treasury Secretary Steven Mnuchin and Federal Reserve chairman Jerome Powell — have criticized Facebook’s plan for the new currency. They warn that it could be used for illicit activity such as money laundering or drug trafficking.
Patrick McHenry, the top-ranking Republican on the committee, expressed disquiet that the Libra Association overseeing the project is based in Switzerland.
But, the North Carolina congressman said, while he had some qualms about Libra he considered it “better to be on the side of American innovation,” expressing hopes that Facebook’s ambitions wouldn’t lead to “comic results” of overly burdensome regulation from Washington lawmakers.
It was a sentiment echoed by a few other Republican members of the panel, though Steve Stivers of Ohio cautioned Zuckerberg: “I think you’ve bitten off more than you can chew.”
A few Democrats on the panel opted not to ask about Libra at all, focusing on charges that Facebook has allowed landlords and real estate brokers to systematically exclude minority groups from seeing ads for houses and apartments. Those allegations are part of a civil lawsuit filed by the Department of Housing and Urban Development.
With respect to Libra, Zuckerberg aimed to reassure lawmakers that his company won’t try to evade financial regulators,
Facebook “will not be a part of launching the Libra payments system anywhere in the world unless all U.S. regulators approve it,” he said.
It was a stronger statement than when Facebook official David Marcus appeared before lawmakers in July, when he said the company will not activate Libra until it has “fully addressed regulatory concerns and received appropriate approvals.” Marcus leads the Libra project.
Admits project is complex, risky
Libra has seen several high-profile defections among other companies that originally supported it, including PayPal, Visa and MasterCard, developments that Missouri Republican Ann Wagner called “highly concerning.”
Zuckerberg said he could only speculate that some companies have bailed owing to the fact that Libra is a complex and risky undertaking.
Wagner and California Democrat Brad Sherman expressed alarm that end-to-end encryption could encourage illicit activities.
“For the richest man in the world to come here and hide behind the poorest people in the world, and say that’s who you are really trying to help, you’re trying to help the people for whom the dollar is not a good currency — terrorists, drug dealers, tax evaders,” charged Sherman.
There has been concern among regulators that the massive reserve created with money used to buy the new currency could supplant the Fed and destabilize the financial system, and that consumers could be hurt by Libra losses.
Zuckerberg warned lawmakers that others around the globe, especially China, were eager to take a leadership role in legitimizing cryptoocurrency.
The Justice Department, the Federal Trade Commission and the House judiciary antitrust subcommittee are all conducting investigations of Facebook and the other huge tech companies amid accusations of abuse of their market power to crush competition.
As well, 46 attorneys general joined a New York-led antitrust investigation of Facebook, it was announced this week.
Sen. Elizabeth Warren, a leading Democratic presidential candidate, has advocated breaking up Facebook and other tech behemoths. She recently ran a fake political ad on Facebook taking aim at Zuckerberg to protest the company’s policy of not fact-checking politicians’ speech or ads in the same way it enlists outside parties to fact-check news stories and other posts.
Zuckerberg’s speech last week at Georgetown University was criticized as naive by Warren and the youngest child of Martin Luther King, whose name and civil rights campaign Zuckerberg evoked.