THE TICKER

Fresh off getting slapped with a record-breaking $5 billion fine from the Federal Trade Commission, Facebook is facing new pushback this week from both the administration and Congress over its proposal to roll out a digital currency. 

The backlash suggests the social media giant faces a steep climb to win regulatory approval for Libra, the cryptocurrency it aims to roll out as soon as next year. 

It also highlights how far the stock of Silicon Valley’s tech titans have fallen with Washington policymakers, from faultless pioneers of the new economy to potentially dangerous monopolists whose power needs to be checked. 

Facebook’s immediate challenge with Libra and its broader struggle against new animus from Washington decision-makers will both be on display today. David Marcus, head of the company’s blockchain division, will be on the hot seat before the Senate Banking Committee. He will seek to reassure senators that Libra will comply with regulators’ demands, police money laundering and terrorist financing, and remain transparent and consumer-friendly, per a preview of his testimony from The Post’s Hannah Denham. 

Meanwhile, across Capitol Hill, executives from Facebook, Google, Amazon and Apple will face a grilling from the House Judiciary Committee’s subcommittee on antitrust enforcement. The companies’ competitors, including Yelp CEO Jeffrey Stoppelman and representatives from Spotify, have been laying the groundwork for the hearing by making the rounds on the Hill, Axios’s David McCabe reported. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)

Facebook has complicated the task of playing defense against antitrust charges by deciding simultaneously to go on offense with its ambitious cryptocurrency plan. And the company’s lobbying push on the issue is coming up short, Politico’s Zachary Warmbrodt writes. Per Warmbrodt, “Key lawmakers and aides from both parties said in interviews that they had not yet had the chance to meet with Facebook or had gotten incomplete, at times conflicting, information from briefings involving the company.” And the company has been doing an unsatisfactory job explaining a complex undertaking: 

“Even lawmakers and aides who spoke with representatives of Facebook in briefings during the last few weeks walked away feeling like they didn't have the full story. Part of the confusion has arisen from the fact that, even though Facebook is spearheading Libra and will operate a digital 'wallet' dubbed Calibra based on the coin, the currency is set to be managed by a Switzerland-based non-profit called the Libra Association that will include companies in addition to Facebook.”

 

Libra has also drawn a chilly early reception from top regulators. The company has tried to pitch the product as an alternative for billions of Facebook users who can't get access to traditional banking. But Treasury Secretary Steven Mnuchin on Monday said the potential for criminal or terrorist misuse of the currency makes it a national security concern. “We will not allow digital asset service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities,” he said. While he said he hasn’t decided to oppose Libra’s rollout, he added he is “not comfortable today” with the plan, and Facebook has “a lot of work to do to convince” regulators. 

President Trump weighed in on the matter last week, stating he is “not a fan” of cryptocurrencies and suggesting Facebook may need a banking charter to proceed with Libra.

That amounted to a rare point of agreement between Trump and Federal Reserve Chair Jerome Powell, who said in testimony before the House Financial Services Committee last week he has “many serious concerns” about the plan. “While the project's sponsors hold out the possibility of public benefits, including improved financial access for consumers, Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability,” Powell said. “These are concerns that should be thoroughly and publicly addressed before proceeding.”

Marcus is set to tell Congress that he agrees with Powell that the regulatory review of Libra needs to be thorough — and the company won’t proceed with a rollout it gets a green light from the feds. “The time between now and launch is designed to be an open process and subject to regulatory oversight and review,” Marcus said prepared testimony. “And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”

Investors so far haven't been spooked by the company’s Washington travails. Facebook’s stock closed at its highest price of the year Friday following reports of the FTC fine for mishandling users’ personal information. 

TRUMP TRACKER

TRADE FLY-AROUND: 

Mnuchin: More trade talks likely this week. Bloomberg's Josh Wingrove: "Mnuchin said he and U.S. Trade Representative Robert Lighthizer may travel to Beijing for trade negotiations if talks by phone this week are productive. 'We expect to have another principal-level call this week, and to the extent we make significant progress, I think there’s a good chance we’ll go there later,' Mnuchin said Monday at a briefing for reporters at the White House. The planned phone call would be the second time the top trade negotiators have spoken since... the G-20 meeting at the end of June."

— Trump’s iron and steel order may be too late: “[Trump] signed an executive order Monday mandating a greater use of U.S.-made steel and iron in federal infrastructure projects, in yet another policy move aimed at lifting the American steel industry,” my colleague Taylor Telford reports

“Peter Navarro, a White House trade adviser, told reporters the order would reinforce the administration’s ‘Buy American' preferences by requiring that 95 percent of steel and iron used in federal contracts be American-made... Despite Trump’s repeated claims that the tariffs have refashioned the American steel industry, their most tangible impact may have been widening the gap between companies, such as U.S. Steel, that use costly legacy blast furnaces, and companies, such as Nucor, that use cheaper, more efficient electric-arc furnaces."

And his tariffs aren't covering the trade war's costs. The New York Times's Ana Swanson and Jim Tankersley: "Trump on Monday portrayed America as being on the winning end of his trade war, saying tariffs are punishing China’s economy while generating billions of dollars for the United States, an economic victory that will allow him to continue his fight without domestic harm...

"But government figures show that the revenue the United States has collected from tariffs on $250 billion worth of Chinese goods is not enough to cover the cost of the president’s bailout for farmers, let alone compensate the many other industries hurt by trade tensions. The longer Mr. Trump’s dispute with China drags on, the more difficult it could be for him to ignore that gap."

— China’s stimulus isn’t working: “A strategy by Chinese policy makers to stimulate the economy with tax and fee cuts hasn’t stopped growth from slowing, stoking expectations that Beijing will roll out more incentives such as easier credit conditions to get businesses and consumers spending,” the Wall Street Journal’s Chao Deng reports.

“Chinese economic growth slipped to 6.2% in the April-through-June quarter, as measured by gross domestic product, after holding steady at 6.4% in the previous two quarters, official statistics showed Monday. Barring a modest recovery in June, signs accumulated that business activity struggled to pick up in the quarter. Consumer spending, which Chinese leaders hoped would support growth, is adding to the picture of cooling demand. The breakdown of second-quarter figures shows how roughly 2 trillion yuan ($291 billion) of stimulus, introduced by Premier Li Keqiang in March, is failing to make business owners less risk-averse.”

— Trump weighs ousting Ross: “[Trump] has told aides and allies that he is considering removing Commerce Secretary Wilbur Ross after a stinging Supreme Court defeat on adding a citizenship question to the census, according to multiple people familiar with the conversations,” CNBC’s Hans Nichols, Kayla Tausche and NBC’s News’s Hallie Jackson report.

“While Trump has previously expressed frustration with the 81-year-old Ross, in particular over failed trade negotiations, Ross’s long personal relationship with the president has allowed him to keep his job. And after the departure of Labor Secretary Alex Acosta, the Cabinet’s only Hispanic who resigned on Friday amid questions about his role in a controversial 2008 plea agreement with sex offender Jeffrey Epstein, Ross may yet receive another reprieve.”

— Shelton has a terrible attendance record: “One of [Trump’s] latest picks for the Federal Reserve, economic commentator Judy Shelton, has amassed a spotty attendance record on the board of the European development bank where she serves as U.S. envoy,” WSJ’s Paul Kiernan reports. “Ms. Shelton missed 11 of 26 board meetings, or 42%, of the European Bank for Reconstruction and Development, or EBRD, in her first year as the U.S. representative... Ms. Shelton said in an emailed response to questions that scheduling conflicts prevented her from attending a number of meetings but added that she coordinates closely with the Treasury adviser who represents the U.S. when she is absent.”

Guggenheim official was in talks to join the Fed: “The chief investment officer of Guggenheim said on CNBC on Monday that he had been approached by the White House about possibly joining the Federal Reserve,” CNBC’s Jesse Pound reports. “Guggenheim’s Scott Minerd said that discussions took place over the past couple of months before [Trump] announced his intention to nominate former advisor Judy Shelton and St. Louis Fed official Christopher Waller to fill vacant seats on the Federal Reserve Board of Governors.”

— Epstein’s fortune could be seized: “The criminal prosecution of New York moneyman Jeffrey Epstein on charges of sex trafficking and the lawsuits stemming from it could dwindle his financial empire to nothing, attorneys with knowledge of the case said,” my colleagues Peter Whoriskey and Abha Bhattarai report.

“While much of the legal sparring that began with an indictment last week has focused on questions of Epstein’s freedom, a secondary struggle may determine how much money Epstein has — and what he will owe and to whom when it’s all over … In addition to seeking prison time for Epstein, federal prosecutors have signaled they will aim for the forfeiture of his $60 million New York home. Under federal law, properties such as his $13 million Palm Beach home, his properties in the Virgin Islands, his jets and a $12 million New Mexico ranch may be vulnerable to similar claims.”

  •  Epstein willing to post $100 million bail: “Epstein is willing to post bail as high as $100 million, his lawyer said Monday, as a prosecutor argued that the case against the wealthy investor is ‘already significantly stronger and getting stronger every single day.’ ” CNBC’s Kevin Breuninger reports. A decision will come Thursday.
POCKET CHANGE

— The new $20 bill is not being delayed: “Congressional Democrats have been hammering the Trump administration for delaying the introduction of 19th-century abolitionist Harriet Tubman on the $20 bill …,” my colleague Jeff Stein reports. “The Treasury Department’s inspector general, under pressure from Democratic lawmakers, recently said it will investigate the timing of the new currency.”

“But the rollout of the new currency has a more complicated backstory. Three current or former high-ranking government officials appointed by President Obama, and involved in the design and release of currency, said the Trump administration has not delayed the release of a new $20. Instead, they say, [Mnuchin] — while expressing indifference about Tubman’s placement on the currency, whereas his predecessor backed the change — has followed a timeline set under the Obama administration for the introduction of the new $20 bill.”

Possible Charles Schwab, USAA Wealth-Management tie-up in the works:Charles Schwab Corp. is in talks to buy brokerage and wealth-management operations from USAA for roughly $2 billion, a move that would push the discount-brokerage pioneer further into the coveted business of financial advice,” WSJ’s Dana Cimilluca, Telis Demos and Justin Baer report. “The deal, which could bring Schwab roughly $100 billion of assets from closely held USAA, may be reached this month, people familiar with the matter said.”

“San Francisco-based Schwab, which already has north of $3.5 trillion in client assets, has been moving further into wealth management as it increasingly expands beyond its roots as a discount broker.”

— Hispanic buyers boost housing market: “Hispanics are experiencing the largest homeownership gains of any ethnic group in the U.S., a turnaround for the population hardest hit by the housing bust that could help buoy the market for years,” WSJ’s Laura Kusisto and Ben Eisen report

“The homeownership rate for Hispanics has increased more during the past several years than any race or ethnic group, including whites. The rate, which hit a 50-year low in 2015, has risen 3.3 percentage points since then, according to U.S. Census Bureau data. The overall U.S. homeownership rate bottomed in the second quarter of 2016 and has grown 1.3 percentage points since then.”

MONEY ON THE HILL

Debt limit talks headed down to the wire. The Post's Damian Paletta and Erica Werner: "House Speaker Nancy Pelosi and [Mnuchin] spoke late Monday as they tried to broker a debt ceiling and budget deal with just days left before Congress plans to leave for the rest of the summer. The talks took on new urgency after Pelosi shot down a White House fallback plan that would have Congress raise the debt ceiling — potentially for just a short period of time — by late next week if they failed to reach a budget agreement. Pelosi, the California Democrat, said the idea of raising the debt ceiling on its own and not in conjunction with a budget agreement was not 'acceptable to our caucus' and therefore did not stand a chance of passage in the House of Representatives."

  • No freakout yet: "People involved in the negotiations said they were not panicking and that there were still multiple options to avoid a full-blown crisis, and they also said that all sides were working hard to reach a resolution. One option would be for lawmakers and the White House to reach an agreement in principle on the budget before the August recess, temporarily raise the debt ceiling, and then agree on specifics in the intervening months."

— Lawmakers question Apple on privacy: “When Apple CEO Tim Cook privately hosted six Democratic lawmakers at the company’s space-age headquarters this spring, he opened the conversation with a plea — for Congress to finally draft privacy legislation after years of federal inaction,” my colleagues Reed Albergotti and Tony Romm report.

“But when [Rep. Suzan DelBene (Wash.)] discussed her own privacy bill, which would require companies to obtain consent before using consumers’ most sensitive information in unexpected ways, Cook didn’t specifically endorse it, she said. A number of privacy advocates and U.S. lawmakers — who did not attend the meeting — say Apple has not put enough muscle behind any federal effort to tighten privacy laws. And state lawmakers, who are closest to passing rules to limit data sharing, say Apple is an ally in name only — and in fact has contributed to lobbying efforts that might undermine some new data-protection legislation.”

Politics
Warren’s campaign says she was “a consultant to ensure adequate compensation for women who claimed injury” from the implants. But participants on both sides of the matter say that description mischaracterizes her work.
Annie Linskey
CHART TOPPER

From GOP lobbyist Bruce Mehlman's latest quarterly slidedeck, history suggests a recession between now and Election Day would destroy Trump's reelection bid: 

DAYBOOK

Today:

  • AEI holds an event about whether there is a new “PhD standard” to getting on the Federal Reserve.
  • The Urban Institute holds an event on black ownership and the gap that continues to persist.
  • JPMorgan Chase, Goldman Sachs, Johnson & Johnson, United Airlines, CSX Corp. and Domino’s Pizza are among the notable companies reporting their earnings, per Kiplinger.
  • The In|Vest 2019 two-day conference in New York kicks off.

Upcoming:

  • The House Financial Services Committee holds a hearing on Facebook’s proposed cryptocurrency on Wednesday.
  • Netflix, Bank of America, Alcoa, eBay and  International Business Machines are among the notable companies reporting their earnings on Wednesday, per Kiplinger.
  • Capital One Financial, Morgan Stanley, Novartis, Philip Morris International, UnitedHealth, Union Pacific and Honeywell are among the notable companies reporting their earnings on Thursday, per Kiplinger.
  • American Express and BlackRock are among the notable companies reporting their earnings on Friday, per Kiplinger
THE FUNNIES

From Politico's Matt Wuerker:

BULL SESSION