tv Washington Journal Chris Brummer CSPAN August 2, 2019 12:00pm-12:33pm EDT
u.s. employers lowered hiring in july but still added 164,000 jobs to the economy. the unemployment rate remained at 3.7% for the second month. the labor department also reporting that the average hourly earnings rose three .2% from a year ago. coming up this afternoon, a look at the ways that the u.s. can look at eliminating weapons of mass destruction in the middle east. forill hear from assistant international security, christopher ford. that is live here on c-span at 1:00 p.m. eastern. is chris bremmer, he is with georgetown university. he is the faculty director at internationalof law at the university. good morning. guest: good morning.
host: what is facebook trying to do and why? guest: the simple answer is that they are trying to create a digital currency that people can use across borders and a digital currency means not necessarily a theirment currency, but own private currency that people can use and ship to one another in different parts of the world. the reason why they are doing this is a little bit complex --ause no one knows exactly they have explicitly said that they want to, and i am reading this because i think it is useful for the listeners to hear, to enable a simple, global currency and financial infrastructure that empowers billions of people. there are some financial motives as well. host: as far as the current system, what would facebook's plan do that others do not? is planning to
create this look currency and by doing so, have established a consortium of different kinds of larger, global technology companies and a couple of nonprofits. the global currency is called the libra currency and the consortium is called the libra association. through this, they are trying to build i e platform that would enable different kinds of uses for the global, this new private, global currency, and help to assist in the adoption and memorialization of the bookkeeping of transactions based on the currency. host: one of the examples i saw was if a person wants to send money to another person in a foreign country that does not have a necessarily strong banking system, this would help alleviate that. is that the goal? guest: that is the concept. sending money across borders is
extremely expensive free almost 7% -- is extremely expensive. almost 7% is eaten by fees. it is one that a lot of people have been interested and there are real goals and benefits for people who do not have access to those kinds of banking services. host: there was pushback from not only a hearing that you testified at the white house itself about this. what are the deep concern from everybody involved as far as an establishment of the system? guest: that is interesting. the pushback was bipartisan. people for a of onck of the better word the democratic end, but republicans as well were concerned about consumer protection, also money laundering. there isrencies, often a degree of anonymity behind those, so are there guys
is more or less the question. but also, there is a of argument that was introduced by the president and some of his tweets which said is this really a pro-american device. creating something that is an alternative to the u.s. dollar, is this something that is good for the united states. there were a variety of interests. host: we will continue on with this conversation with chris brummer. if you would like to ask , you can tweet us your thoughts are questions @cspanwj. steve mnuchin, let's hear from him. [video clip] month, the libra association, a consortium of 28 businesses including a facebook issidiary announced it
developing a cryptocurrency called the libra. the treasury department has expressed very serious concerns that libra could be misused by money launderers and a terrorists financiers. cryptocurrency such as bitcoin have been exploited to support billions of dollars of illicit taxvity like cybercrime, evasion, extortion, ransomware, illicit drugs, human trafficking. many players have attempted to use cryptocurrency's to find maligned behavior. this is indeed a national security issue. the united states has been at the forefront of regulating entities that provide kept oh currency. asset servicelow providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of
illicit activities. host: pull something from that and what is he saying? the concern coming out of the treasury department is one of financial crime. -- badely that bag guys can use the proceeds from --icit activity and s that type oft activity, he is taking and aim at all cryptocurrency saying, we are going to start stepping in and we are going to start trying to regulate some of the intermediaries in these transactions to help to ensure some market integrity because there are a lot of bad things that happened in the world and people can hide their money via some of these cryptocurrencies. host: when you talk about bitcoin, the ideas that when you invest in bitcoin, it grows in
value. does the facebook concept have that feature? guest: bitcoin and the libra are entirely different concepts even though they raise certain kinds of concerns. bitcoin is entirely decentralized. really, anyone can get into the process of memorializing newsactions and creating a network, and as a result, it is very hard to censor and it is very hard to unwind transactions on the bitcoin block chain. libra is, by contrast, highly centralized. facebook for the moment is driving the bus. it says that any year or so, it may end up handing the baton to the libra association at large, so right now, they're only 27 or 28 entities. but that is very, very different nodes world of far-flung
that you see any bitcoin, decentralized universe. they are very different concepts even though they can both raise different kinds of red flags depending on the jurisdictions in which they are operating. so lightly regulated jurisdictions can create a portal for illicit funds. have a saycongress or oversight over such a thing should it exist? guest: the challenge of financial technology is that they kind of fit in the gaps of different kinds of regulatory rules. it is very hard to define, for example, how should one classify bitcoin. do classify it as something, do the rules relating to that something, are they up-to-date enough to deal with the risk that bitcoin or any other cryptocurrency poses. , theis particular example
facebook cryptocurrency of libra, many people have said, this looks and smells a lot like something called an exchange traded fund or an etf. the structure that this is done where they have this association and they are creating a portfolio of assets where i give you my money, i get libra in return, and the money i am giving you has been deposited somewhere and essentially invested somewhere else -- this looks like an etf. even the words used to describe the different intermediaries in the facebook description, it literally take some of the words are normally associated with etf's. there are some kinds of questions being raised, but even then, even if we call it an etf or call it a security or a stock or bond, that is something that congress is trying to grapple with. host: let's hear from viewer, marked in florida.
-- mark in florida. good -- caller: i am listening to what you are saying and i have been telling friends and family in the decade that the world is going to be moving toward centralized electronic money. there are a lot of risks in this as well, and for example, you are not going to have any other nominated -- a nonentity anymore -- anonymity anymore. everything will be electronic. it isgoing to have -- going to be kind of centralized eventually. some negatives to that for the people. if you get that one centralized
sudden,at is all the there is a term that says power corrupts and ultimate power corrupts ultimately -- and you run into problems. host: we will let our guest answer. guest: that is a great observation and it is a red flag that has been raised in really brought to the floor of it because it is facebook in particular. facebook is effectively a data company. now wanting to reinvent itself into making it into a financial services company. facebook has created a subsidiary called colibra which is going to be the wallet for many of the libra coins that
will be created. in theory, this could allow for facebook to be able to track not only what you are doing in terms of social media, but what are your transactions and in the wallet -- transactions in the wallet. a promise there'll be safeguards to safeguard that information, but it would just find about $5 billion for privacy violations, so there are some real concerns about what happens in terms of the consolidation of economic power you have a major technology company that is going into finance. of course, as you mentioned -- they anonymity that people have always assumed to be inherent in cryptocurrency transactions, it turns out it is not as anonymous as people thought. you can still track transactions even if you do not know exactly who a person is, and once that person jumps out of the cave and into the light, once they try to
liquidate their cryptocurrencies and sell them for normal money, they reenter the regulated financial lots have created techniques to be able to either the five people precisely at the pressure point when they are trying to reenter the normal world of government currencies. host: this is blair in minneapolis, republican line. caller: thank you, c-span. chris, don't you think that for central governments, this kind of thing is their worst nightmare? what central government wants to give up control of the payment system and the currency. it have devastating effects on the borrowing cost and the ability for a government to raise money? i almost think when they talk
about money laundering and all of these things, all of that happens now with the current currency and payment system. this is almost like a nuclear option. to them. because of that, i do not see central governments allowing these kinds of initiatives to come to full bloom. i would be very interested in your thoughts on that. guest: what a great question. it is true. one of the best vehicles for money laundering is crash. -- cache. -- is cash. there has been a significant amount of discussion of whether or not libra would create challenges for central banks in part because the way in which they are creating the currency is that they are saying, we are going to have this libra, and we will back it with government currencies and also government securities.
it depends on what currencies are in the basket, but you can imagine, a number of reasons or ways in which there could be a run on the currency. i will give you a simple example because i think it is something everyone can understand. right now, facebook, for example, saying we are going to have safeguards, we will not track your transactions and how you spend your money. we will keep the information separated from the data we keep about you in terms of how you use facebook as a platform. imagine if you have these or people have libra or globalized thathey learned somebody from facebook or another member of the -- as anon can access invasion of privacy. when you are doing that and you are suddenly liquidating and buying or selling some of the currencies in the basket, it can be destabilizing and you can
think of hacks and other types of cyber security concerns. this,l banks are weary of particularly central banks and developing parts of the world. facebook has said that their major goal is to increase access for the unbanked. the country with the mostu u nbanked, india, they have said they already don't want to breath and it coul threaten the monetary sovereignty. have a weaker currency, you can imagine all kinds of potential instability where people decide to either buy or sell your currency if it is included in the basket. are: somewhat off of you says i have wholeheartedly adopted google pay, zelle, and venmo.
why the need to add this to the group? guest: there was a congressional hearing this week. one of the comments that was expressed was, right now, facebook is trying to come up with -- arguably other companies , trying to come up with a technological solution to this remittance problem. and also the fact that it takes so long for money to clear and settle in the united states. check,get a physical it could take four or five days for that to clear. if you are trying to pay for your mortgage or car, you can get into problems in the gap. what people said just this last week in the senate banking hearing is that maybe it is not a technological problem, maybe it is a policy problem. and maybe there are certain kinds of things that are central banks should do in order to accelerate payment and begin to
crack the ola godley on ply onborder -- oligo cross-border fees. host: democrat line, matthew, go ahead. caller: good morning, how are you? guest: good morning. caller: i think that cryptocurrencies is kinda like a religion, and i really do not find anything that backs this. there is nothing hard and nothing tangent. it seems this currency could be they decide to make the price, it seems that is what they can come up with. i could be wrong, but it seems to me that every time i tried to get some research to see what is this cryptocurrency based on, i find that there is nothing but thin air.
your response. brummer. guest: you are not the only want to make that critique, but it is again very important to distinguish trip to currency and emphasize two things. number one, how they are structured can be very different. as i said earlier, the libra cryptocurrency is backed by something. it is backed by other currencies, national currencies, and government securities. we do not know exactly which ones, but we know it will have something there. it can introduce all kinds of risks, but then you get bitcoin which as you said -- bitcoin is self-referential and so far as the value is really determined by demand which is its own utility. it is very useful and it can be used in lots of different places
in the technology behind a lot isthese cryptocurrencies called a block chain technology. that is pretty interesting stuff and you can imagine ways in which you will be able to one day program money, and how it is spent, and when it is spent. there could be some useful applications there. cryptocurrencies are very, very different. people are trying to figure out a little bit like a rubik's cube what constellation of features are going to be both regulatory regulatoriiant -- k -- regulatorily compliant. conversation can become quite technical but also quite interesting. will hear chicago, we from marcia on the independent line. caller: yes, hi. i might have missed out on the
conversation, so maybe you covered this. how would this affect the demand deposits? lot the bank lose a interest money on the deposit? i was just wondering. guest: what an interesting question. , why ishe first issues facebook actually -- and i assume the question had to deal with libra, but why would facebook get into the financial services business? it is quite interesting because i have an example of when you give your money in u.s. dollars, you get a libra coin in return, and that money is either put into an account or is invested into some kind of government security. notice that when i give you that money, that dollar, i, as a customer, am not receiving interest on the money anymore.
and instead, the money earned or withated is going to be facebook or the libra association, investors in the product will be able to earn a return based on the amount of mind that has given them. it is not a low interest deposit. it is a no interest deposit subject to some kind of foreign exchange risk. it is true that from a customer standpoint, you are not going to be able to get interest earnings. presumably, the libra association will be able to earn interest as well as other money off of the float, in terms of the money that has been given to them. but the consumer will not. host: the stakeholders, will they be required to put in some type of cash to begin with? inst: each of the investors the libra association have been required to put in $10 million.
reports are that that has not happened. agreements between the 28 or 29 members is somewhat tentative. but that is the expectation. it is also the expectation that that is the floor and other members are -- some may be expected or urged to contribute more money. it is interesting that facebook's latest filings with the ftc, they have recognized the fact that this has attracted much more scrutiny on capitol and as well as with the fcc with international regulators. they have signaled that this sort of project costs more than this -- they anticipated because of the scrutiny and the extra steps they have to take to ensure that the project is safe and sound. host: it facebook itself is a part of the initiative, does it get more say and what goes on with this product because they are the founders? guest: right now, yes.
it is true that until they decide to pass off the baton, facebook is driving the bus and able to shape and fashion this libra ecosystem that certainly suits its interests. i would assume they have to negotiate with the people who are tentatively on board with $10 million with how they ultimately shave out the margins of that system. however, once they go live, dave marcus,said, the cofounder of the co-libra project has said that each of the 27 members and ultimately, 100 members -- they will all have an equal say, and even when they invest more money, that the amount of say each member will ultimately be kept. ifever, you can always query one member builds more infrastructure -- so each of these members has this investment opportunity where they can build different kinds of apps, and one could argue is that facebook's interest is to
build a superapp because you will be able to make payments through whatsapp and its messenger system. if you build up the infrastructure and more of the transactions are going through your infrastructure, that can, by consequence, give you more de facto control over the system. host: this is from nate in cincinnati, ohio. caller: good morning, mr. brummer. what wondering implications were to those living in the third world that do not have access to electricity or let alone, electronic devices that would be needed to have access to the digital currency. guest: that is a wonderful question. premise is wek's are going to create this global currency as a means of increasing financial services access to financial services the people in developing countries.
the presumption was that in many parts of the world, particularly in developing countries, people tend to have cell phones. au can kind of jump over stage of development by leveraging the fact that they have cell phones and use basically their phone as a bank, although they would argue that they are not a bank so they don't want to be regulated as a bank. it is important to emphasize that their ideas if you can use your cell phone and get online, that that is an access portal to financial services. for lots of reasons including the regulatory concerns and the fact that you do not want to become a conduit for money laundering or anything else, in order for this to likely work, you will have to set up an account, people will need to have some indication as to what your identity is. will haven etf, you to go through a broker, so you can ask yourself if you don't have a bank, what is the likelihood you will have a broker-dealer for these kinds of
transactions. and even political leaders in parts of emerging economies are very skeptical of the project in part because they are concerned that by introducing this kind of private, global currency, it can end up messing up their monetary systems and domestic economies. even hypothetically if you portal, create a does this end up coming back to haunt those same people by destabilizing their local economies? these are all open questions. host: is there a rollout date for this? guest: there was a very ambitious rollout date, but a number of members of congress have argued for a moratorium. they have said they are not going to move forward until they have all of necessary regulatory compliance, and in the facebook acknowledgedhey
that the project may not go forward at all. mer, thanks brum you for your time today. >> u.s. employers slowed their hiring in july but still added 164,000 jobs to the economy. the unemployment rate remained at 3.7% for a second straight month. the labor department also reporting that the average hourly earnings rose 3.2% from a year ago. coming up this afternoon, a look at the way the u.s. could work towards eliminating weapons of mass destruction in the middle east. we will hear from assistant secretary of state from international security and nonproliferation, christopher ford. that is live on c-span at 1:00 p.m. eastern. saturday morning at 10:30 eastern on c-span, we will show you the first of two democratic presidential primary debates from detroit hosted by cnn.
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in elections at the local, state, and national level. >> at 8:00 p.m. on the arrillency, author john f talks about nixon's early life and career. 1947 and 1948, he campaigned for the martial law. then his best judgment, not his obedience, and he convinced them. when the -- he did not just win the republican nomination, he won the democratic nomination. onexplore our nation's past american history tv every weekend on c-span3. host: anna edney's with bloomberg news as a health policy reporter and we are