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Facebook Hearings Will Miss the Point, Just Like the JPMorgan Chase Hearings

Courtesy of Pam Martens

Wall Street Street SignFacebook’s CEO, Mark Zuckerberg, will testify before a joint session of the Senate Judiciary Committee and Senate Commerce, Science and Transportation Committee tomorrow afternoon. He’ll head to the Hill again on Wednesday morning to testify before the House Energy and Commerce Committee. Zuckerberg’s testimony comes as a result of the stunning testimony that Cambridge Analytica whistleblower, Christopher Wylie, gave to the British Parliament on March 27 of this year on how tens of millions of Facebook users had their private information obtained without their permission by Cambridge Analytica, a company deeply involved in the presidential campaign of Donald Trump.

Zuckerberg conceded in a public statement on April 4 that the privacy breach by Cambridge Analytica could have affected as many as 87 million Facebook users. Zuckerberg also acknowledged that “most” of its 2 billion worldwide users may have had their profiles scraped by outside actors.

The scandal and Congressional hearings are reminiscent of JPMorgan Chase’s scandal, infamously known as the London Whale. Both Facebook and JPMorgan Chase have grown rich on dubious business models.

In 2012 and 2013 the U.S. Senate and House held various hearings on the fact that JPMorgan Chase, America’s largest bank, had been gambling in high risk derivatives in London and sustained losses of at least $6.2 billion. Buried from public debate among all the complex details covered by these hearings was the central issue: JPMorgan Chase had a perverted business model that allowed it to gamble in high risk derivatives with its depositors’ money, that was backstopped by Federal insurance which the U.S. taxpayer ultimately guaranteed.

On March 14, 2013 the Senate’s Permanent Subcommittee on Investigations released this statement on the London Whale trades:

“The whale trades were conducted by traders in the London office of the Chief Investment Office (CIO) of JPMorgan Chase & Co., America’s biggest bank and largest derivatives dealer. The Subcommittee’s investigation has determined that, over the course of the first quarter of 2012, the CIO used its Synthetic Credit Portfolio (SCP) to engage in high risk derivatives trading; mismarked the trading book to hide losses; disregarded multiple indicators of increasing risk; manipulated risk models; dodged regulatory oversight; and misinformed investors, regulators, and the public about the nature of its risky derivatives trading. The Subcommittee’s investigation has exposed not only high risk activities and abuses at JPMorgan Chase, but also broader, systemic problems related to the valuation, risk analysis, disclosure, and oversight of synthetic credit derivatives.”

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