Since 2007, Sherrod Brown has served as the United States Senator from Ohio. From 1994-2007, he was the U.S. Representative for Ohio’s 13th District, and from 1983-1991, he served as Ohio’s secretary of state. He is a member of the Democratic Party. He answered questions from The Politic via email in April 2022.
I want to start by discussing the world of cryptocurrencies. They’re a hot topic right now, but they’ve often been knocked as chiefly a tool that facilitates illegal activities. How do you feel about that criticism? If you agree, do you see more legitimate uses for cryptocurrencies on the horizon?
I am very concerned about the growing use of cryptocurrency by bad actors – look at ransomware attacks, where digital assets play a pivotal role. The Banking and Housing Committee has held a number of hearings exploring different aspects of cryptocurrencies, including one on its role in illicit finance. I’m committed to working with regulators and my colleagues in Congress to protect consumers and investors and crack down on the use of digital assets in illicit finance.
Are cryptocurrencies a threat to the status of the dollar as the world reserve currency?
Cryptocurrencies are too volatile and speculative to threaten the U.S. dollar, which is backed by the full faith and credit of the United States.
Are you hoping to implement legislative regulations on cryptocurrencies? How would you hope to design and enforce such laws?
There’s no question that we need to address the risks of digital assets – including fraud, theft, and little to no protections for consumers. Congress and the financial regulators will need to work closely together to tackle these issues. I’m glad that President Biden has appointed regulators who are focused on crypto markets, like Securities and Exchange Chairman Gary Gensler. We’ll also see what comes of President Biden’s recent executive order, which directs the federal government to study cryptocurrencies and provide information about how we can protect consumers, safeguard our national security, and ensure the U.S. continues to lead the world.
Why do stablecoins in particular pose such a unique risk to the American consumer, and to our financial system as a whole?
Stablecoin companies suggest that they’ve created something that works like money. But already, we’ve seen serious consumer protection issues and outright fraud in the stablecoin market. We need to make sure that stablecoins don’t jeopardize our financial system – especially as Americans are getting back on their feet after the pandemic.
Last month, the CFTC reached a $1.4 million settlement with Polymarket for facilitating illegal gambling. Broadly, the lawsuit highlighted the complicated relationship Decentralized Finance (DeFi) has with the law. Should Congress take steps to reign in DeFi? What might those steps look like? How might such regulation work practically?
DeFi arrangements are opaque, use leverage, and raise serious concerns for consumers, and I appreciate that CFTC Chair Behnam and SEC Chair Gensler are looking at it closely.
The Federal Reserve recently started a debate on the pros and cons of releasing a Fed–backed digital currency. What are your thoughts on the matter?
I believe a central bank digital currency could bring more Americans into the banking system and help maintain U.S. leadership in the global economy. The Fed’s recent report on a digital currency was a good first step, and I will continue to work on the issue.
I want to transition away from cryptocurrencies and talk about some of the work you’ve been doing in the past year. One of the things you’ve highlighted is the disparity between Wall Street and Main Street in the American economy. Last year, you said that “the stock market is detached from the economy and the reality of most Americans’ lives.” What effect does this detachment have on America, and how can it be remedied?
In 2020, financial markets recovered quickly from the pandemic, soaring at a time when millions of Americans were still unemployed, small businesses across the country were still closed, and many of us watched loved ones get sick. When something like that happens, it makes Americans believe, for good reason, that Wall Street plays by a different set of rules. I hear it all the time from people in Ohio and around the country – they don’t trust Wall Street to have their backs. We need to make sure that our financial system actually reflects the contributions of families and workers to our economy, and lets them reap the benefits of the innovation and economic growth that they create.
Companies like Robinhood have become sensations after promising to democratize finance, to effectively bring the stock market to the average American. But Robinhood has also attracted its fair share of controversy — last year, for example, you claimed that Robinhood “exploits small investors.” Can you explain why you view such companies as pernicious?
These companies are built around business models that encourage trading in order to enrich Wall Street, not to reward small investors. They’ve created a game where big institutions like hedge funds always win, no matter what happens to people trading at home. That’s not “democratizing” finance – it’s the same story we’ve seen from Wall Street time and again.
One of the side effects of the Robinhood saga was the highlighting of a controversial financial practice called Payment for Order Flow (PFOF). Senator Pat Toomey, the Ranking Member on the Banking Committee, has voiced support for the practice –– others have called it duplicitous. Where do you stand on Payment for Order Flow, and do you think it will survive in the near future?
When brokers sell client orders to big trading firms in “payment for order flow” they create a conflict between brokers and their customers. Business models that enrich Wall Street while taking advantage of investors usually end up imploding, putting families’ life savings and retirements at risk.
2021 was rife with financial dramas, and among the biggest was what you called “the implosion of Archegos capital.” What are the lessons to be learned from the aftermath of the Archegos disaster?
The biggest global banks bent over backward to do business with the Archegos family office – and they lost billions because they let the owner take outsized risks. We’ve seen things like this happen over and over, causing substantial risk to our financial system – which is why it’s past time we crack down on Wall Street’s addiction to excessive leverage and risky trading.
Finally, as Chairman of the Senate’s Banking, Housing, and Urban Affairs Committee, I wanted to hear what you’re focused on in 2022. Are there any specific challenges, issues, or opportunities that you want to tackle this year?
I want to make sure that the Banking and Housing Committee focuses on workers and their families – investing in housing and transportation while making the banking system work for everyone, not just Wall Street. Over the past year, we’ve held hearings on rural housing, racial discrimination in housing, appraisals, and opportunities to make housing and communities more energy efficient and resilient. Issues we’re working on include ending arbitration in consumer financial products, the role of institutional landlords in housing, and confirming President Biden’s nominees at key agencies like the Federal Reserve.