Is Senate Banking’s Facebook inquiry the start of something big?
The Senate Banking Committee has its sights on Facebook.
A recent two-page letter from Sens. Mike Crapo, R-Idaho, and Sherrod Brown, D-Ohio, directed at Facebook CEO Mark Zuckerberg, didn’t include the kind of fiery rhetoric dominating headlines these days. In fact, it stopped well short of calling for (or even hinting at) the breakup of the social media company and its big tech brethren — as some top Democrats have recently started to do.
But it may still prove to be an important step forward in the debate.
Innocuous as the letter may seem at first glance, Crapo and Brown make what could be critical inroads. They press the company about its plans to launch a cryptocurrency payments system, the collection of any consumer financial information and data it might have that would inform credit decisions. They also raise the issue of whether Facebook should be subject to the Fair Credit Reporting Act. (Neither the lawmakers nor Facebook responded to a request for comment.)
The question now is whether the committee leaders view the letter as the start of a larger discussion around big tech’s forays into banking — or as more of a one-off fact-finding mission. That remains to be seen, though observers stress that it’s going to be an issue to watch.
“It’s quite important — if Crapo and Brown want to make it important,” said Brandon Barford, a partner at Beacon Policy Advisors. “They’re asking good questions, so it’s a matter of how far they want to push it and how much political capital they want to spend.”
Following are three questions to consider as this debate heats up.
What do regulators think?
Barford notes that the lawmakers have several options for how they could pursue further action against Facebook: They could tackle the issue head-on through legislation or put pressure on regulators to take a bigger role in policing the social media company and other big tech firms.
As luck would have it, the heads of the primary banking agencies are slated to testify before the committee on Wednesday, providing an opportunity for lawmakers to potentially press regulators on their views.
“It’s a good opportunity to bring it up,” Barford said.
Can the effort remain bipartisan?
Crapo and Brown have repeatedly worked together on these issues — starting in February with a public request for information on the use and protection of sensitive information by financial regulators and private companies.
Notably, the lawmakers’ opening statements at a hearing on privacy held last week each cited this collaboration. Such remarks “suggest they maintain a keen interest in working together to influence the current debates over privacy and data collection legislation,” said Ed Mierzwinski, senior director of the federal consumer program at U.S. PIRG.
With Congress divided, any stricter actions taken against the big tech firms — including their use of financial data — will need support across both sides of the aisle.
Will the inquiry fuel broader debate?
The Crapo-Brown letter is likely to expand what’s known about Facebook’s data collection practices, which could help spur interest in federal privacy legislation.
“I don’t know that this will be a significant catalyst — but there is a fairly good chunk of hay on the camel’s back building up to that point," said Sam Taussig, head of global policy at the online lender Kabbage, which focuses on loans to small businesses.
He noted that it will be particularly important to see how the social media giant responds to questions about what consumer information it has obtained from financial companies — and how lawmakers react to that disclosure.
“That’s a huge sticking point,” said Taussig. “We need to encourage a national framework that gives individuals complete ownership over their financial data.”
Solving the debate over privacy — and what to do about the vast access big tech companies have to consumer information — isn’t likely to be a quick fix. But the Banking Committee’s letter has no doubt put Facebook on notice, and could suggest there's more progress on the way.
That is, if Crapo and Brown decide to pick up the mantle.
Bankshot is American Banker’s column for real-time analysis of today's news.