Trump signs the largest rollback of financial regulations since the 2008 crisis into law; Zuckerberg masterfully evades the questions of European parliamentarians; Amazon has developed a “powerful and dangerous” new facial recognition system; and why don’t health insurers mind big hospital bills?
- Nearly a full decade after Lehman Brothers collapsed and took down the global economy with it, President Trump signed into law the biggest rollback of banking regulations since the financial crisis. In a rare display of a bipartisanship, the bill—which will reduce oversight on larger and mid-level banks and “leave fewer than 10 big banks in the United States subject to stricter federal oversight”—passed the House 258-159, with the help of 33 Democrats. In Medium, reporter Donny Shaw finds that House Democrats who voted for the bill received on average three times more campaign contributions from banks and financial firms than Democrats who voted against it. Even with the new law signed, however, bank lobbyists are not resting on their laurels: Reuters reports that financial industry groups are already seeking more regulatory rollbacks.
In case you missed it, check out Jihad Dagher’s column from this week on 300 years of pro-cyclical financial regulation.
- In the Washington Post, Jeff Stein profiles one such person who successfully lobbied for the rollback of financial regulations: former Democratic Congressman Barnie Frank, co-author of the Dodd-Frank act that bears his name and currently a board member of a New York-based financial firm called Signature Bank.
- The European Union’s ambitious General Data Protection Regulation (GDPR) came into effect on Friday, allowing users to opt out of data collection and potentially reshaping the way that companies approach subjects like user privacy. In the Washington Post, Tony Romm, Craig Timberg and Michael Birnbaum proclaim that “Europe, not the US, is now the most powerful regulator of Silicon Valley.” And in the American Prospect, David Dayen addresses arguments that the new regulations will only entrench incumbents like Google and Facebook. “If Google and Facebook come out of GDPR on top, it’s because they’ll have successfully distorted its meaning and offloaded responsibility on partner publishers and websites,” he writes.
- Facebook founder and CEO Mark Zuckerberg was questioned by European Parliament members this week, his first appearance before European legislators since the Cambridge Analytica scandal broke. It did not go well. As expected, some MEPs, like Guy Verhofstadt, had tough questions for Zuckerberg regarding Facebook’s business model and monopoly in social media. But Zuckerberg did a masterful job of evading most of their questions, cherrypicking the ones he liked and angering many by ignoring the toughest questions altogether. In The Guardian, Tristan Harris explains what the European parliamentarians should have asked Zuckerberg.
Also, don’t miss Harris’s interview with Luigi Zingales and Kate Waldock on targeted advertising in the latest episode of Capitalisn’t.
- In The Guardian, Carole Cadwalladr and Emma Graham-Harrison have two new stories on Facebook’s data collection. Both concern a lawsuit against Facebook by a developer called Six4Three that alleges Mark Zuckerberg developed a “malicious and fraudulent scheme” to exploit private user data. The lawsuit claims that Facebook “deliberately used its huge amounts of valuable and highly personal user data to tempt developers to create platforms within its system, implying that they would have long-term access to personal information, including data from subscribers’ Facebook friends.” Then, once the apps were running, Facebook allegedly “target[ed] any that became too successful, looking to extract money from them, co-opt them or destroy them, the documents claim.” According to the lawsuit, Facebook also “used its apps to gather information about users and their friends, including some who had not signed up to the social network, reading their text messages, tracking their locations and accessing photos on their phones.”
- 60 Minutes aired a segment last week on Google’s monopoly in online search and search advertising. Following the piece, Treasury secretary Steven Mnuchin urged the Justice Department to examine the power that digital platforms such as Google have over the US economy. Yelp, one of the Google rivals profiled in the piece, has filed a new complaint with the EU’s Competition Commissioner, alleging that Google has abused its dominance in local search to favor its own services.
For more on Big Tech and competition policy, you can tune in to this panel discussion from the Milken Institute’s 2018 Global Conference, featuring the Trump administration’s antitrust chief Makan Delrahim, Luigi Zingales, Sally Hubbard, and Tyler Cowen.
- Following the Google-Project Maven controversy, Wired’s Nitasha Tiku has a new piece exploring the links between Silicon Valley and military work. When she wonders why only Google employees felt the need to speak out, instead of say, Amazon employees, one Amazon engineer shares the following insight: “Amazon culture is more pragmatic and less idealistic than Google. Amazon’s ethos is about business ruthlessness rather than technical purity, and that does filter down to individual tech employees.”
- In related news, the ACLU reported this week that Amazon has developed a “powerful and dangerous” new facial recognition system, Rekognition, and is actively helping governments deploy it. Rekognition, which reportedly can “identify, track, and analyze people in real time and recognize up to 100 people in a single image,” already lists Orlando, Florida, and the Sheriff’s Office in Washington County, Oregon among its customers. In Orlando, reports Engadget, the system is already being tested, though for now “it can still only track the seven officers who volunteered to test the system.” Obviously, this is raising some concerns.
- Frank Pasquale has a great new piece on “tech platforms and the knowledge problem” in American Affairs. “In an era of artificial intelligence and mass surveillance, however, the possibility of central planning has reemerged—this time in the form of massive firms,” he writes. “These firms are no longer mere market participants. They make markets and need to be treated as such.”
- On a related note, Arindrajit Dube, Jeff Jacobs, Suresh Naidu, Siddharth Suri outline new and fascinating findings on monopsony power in online labor markets in VoxEu.
- From The Economist: Several state legislatures are now considering restricting the use of non-compete agreements, at least for workers on modest wages.
- ProPublica has a new series on health insurance companies and the role they play in boosting up health care bills, titled The Health Insurance Hustle. In the first story, Marshall Allen explores why health insurers don’t mind paying big hospital bills. Tarbell also has a new piece exploring yet another aspect of America’s broken heath care system: “drug suppliers hiding the profit they make off you.”
- New York’s Eric Levitz has a new piece arguing America’s current version of capitalism—“characterized by, among other things, weak labor unions, corporate concentration, low growth, and high inequality”—is “incompatible” with democracy.
Chatter from the Ivory Tower
- This week the American Economic Association announced the creation of its new Committee on Equity, Diversity, and Professional Conduct, chaired by Chicago Booth’s own Marianne Bertrand. On the anonymous economists’ discussion board EJMR, many users bewailed the development.
- On his NYT Opinion blog, Paul Krugman interwove his take on the current debate on wage stagnation in the tight labor market with an extended complaint on the current vogue in econ discourse for the unwieldy Twitter thread: “This latest debate,” he writes, “has taken place largely through dueling Twitter threads – which is, I’d say, awful. The economists involved are very smart, and the threads very informative; but for people trying to keep track, including students, this is really a mess.”
Stigler Center Goings-on
The Stigler Center’s final conference of this academic year, co-organized with HBS and Oxford’s Blavatnik School of Government, will examine “Corporate Political Engagement in Europe and the US” at Oxford on June 9 and 10.
Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.