tv Bloomberg Markets Americas Bloomberg October 31, 2017 2:00pm-3:30pm EDT
scarlet: we are live at bloomberg world headquarters in new york. here are the top stories we are covering around the world. we are just moments away from a major event on capitol hill. to it lawmakers get ready grill top lawyers representing facebook, twitter and google over the reach of russian ads in the lead up to the 2016 u.s. presidential election. we await president trump's decision on his choice to leave the federal reserve. we will get important insight from steven englander. plus we will ask about today's decision by japan's central bank to keep its massive monetary stimulus program unchanged while reducing its inflation forecast. close in two hours time. abigail doolittle is tracking the moves.
the big loser yesterday has come roaring back today. >> we are looking at gains after a bit of a pullback yesterday. the nasdaq up nearly half a percent. putting in a new all-time high. it does follow the more than 1% drop yesterday. the russell 2000 still about 1% below its record high. there are some strategists who think the russell 2000 shopping is could be a precursor for a near-term pullback for the major averages including katie stockton of btig. we could see a near-term pullback for the major averages. would refreshs it a potential year and rally. let's take a look at the small cap underperformance. it's a one year chart of the
russell 2000 to the s&p 500. overall not doing much over the last six months. that going into september. big small-cap outperformance. lots of these companies are very u.s. based. very sensitive to the tax policy. over the month of october really underperforming. this could be a tell on what's ahead for the s&p 500 and the dow. take a look at some tech stocks performing very well on the day. nearly 1.5%. lots of positive chatter around the preorders for the iphone x. usee said it may not qualcomm chips and its iphone. this on samsung comments around memory. lots of good stuff here for technology. let's take a look at companies that are higher on takeover talks. rockwell automation of 8%.
earlier emerson electric made at 27 point billion dollar offer. rockwell automation has rejected that. is in play. charter communications higher on a report from the nikkei. the tokyo newspaper since to have frequently impact stocks in the u.s. scarlet: stern to central-bank policy. decision is due out tomorrow. president trump will make his choice for fed chair on thursday. the president is leaning towards fed governor jerome powell. joining us now is steven englander. we will get to the fed chair derby in a moment. i want to start with the fomc meeting and decision. no drama here because everyone is priced at 25 basis points. and 2016 they gave very strong signals the meeting before december that they were
going to hike. the fence problem or the fomc problem tomorrow is that you have brain heard evans, kaplan and catch kerry saying we are still up in the air. if they don't give that explicit signal that 85% that's priced in will actually fall off. julia: look at the core pce numbers as well. coming in at 0.1% month on month. kind of had justification in some of the inflation data continuing. >> i think their noses will grow longer. i think that's the fence problem. they may have a hard time theing those to sign on to hike in december. if the market sees that they use the same language as last time that was pretty ambivalent.
it was kind of data dependent. thing to raisene concerns and not go along with the consensus. it's another thing to actually vote against the decision. >> india. it could be a going away present to fed chair yellen. that's not what they are supposed to do. there's nothing that forces them to be so focused on inflation. and then decide, it really doesn't matter right now. you are saying if we don't get this not in the language in the statement to suggest they are going to hike in december they remain data dependent. how much is repriced out by the markets if they don't get the nod you are indicating? scarlet: what does that mean for bond yields given we have reached this critical level?
if you can't get the big consensus for december there is not that enthusiastic content -- consensus that they will be hiking next year as well. let's talk about the other eagerly awaited decision this week. how eagerly are you anticipating the eagerly anticipated >> it is roughly 85% priced in. if they named jerome powell to the chair is predicted all these markets, nonevent. i think if they named taylor as vice chair at the same time whenever dovish impact how will have right now would be offset by having someone as hawkish as vice chair. if he just gets a seat on the board i think it's been there, done that. we always have hawks on the board. it doesn't matter that much. do either of these
names compel anyone from the current fed to step down? i'm not saying anyone would do so in protest but with they take the opportunity to save my term is done i think of going to move on? >> i don't think so. they are there to represent their views and make monetary policy decisions to the best of their ability. unless there's something wrong with the process i think they would hang on. i have read so many articles thing they're concerned .bout the credibility do you think we are being too alarmist? >> i guess. with the respective getting named as chair.
they are pretty independent. i think if you count on loyalty or someone toeing the party line once they are chair you are probably making a mistake. scarlet: it might look like a reality show but it generates a lot of debate and it gets people thinking about what different people would bring to the table. that can't be a bad thing. steven englander, sticking with us. we'll discuss the latest decision from the bank of japan as well. the bloomberg first word news. trump has a timeline for when he will have a tax bill ready to sign. >> i want the house to pass a bill by thanksgiving. i want all of the people standing by my side when we get ready to sign by christmas. hopefully before christmas. >> republicans are trying to
fast-track the bill to deliver president trump's first legislative victory. the white house says president trump will not visit the heavily fortified border between north and south korea known as the hislitarized zone during upcoming trip to asia. a senior official says there's not enough time in the present schedule to accommodate the visit. every president but one since ronald reagan has visited the dmz. ahead of the yuan environment program is predicting that the united states will live up to the paris climate accord despite president trump's plans to pull out. program executive director said today the question he is asked most often is what about donald trump and his reply is that corporate america is going greener whatever happens in the white house. kenya's opposition leader is
criticizing the country's election rerun process which once again declared incumbent making hishe winner, first public comments since results were announced monday. he says opposition protests will continue until the vote is nullified a second time in less than three months. the october 26 vote. he ended his supporters could appeal to the nation's highest court. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. a programming reminder. we will have special coverage of tomorrow's spent decision at 2:00 p.m. eastern time. bill gross, jeff rosenberg and our very own scarlet fu. this is bloomberg. ♪
julia: this is bloomberg markets. i'm julia chatterley. scarlet: i'm scarlet fu. steven englander is still with us. also coming up this week the mark carneyand conundrum. the market is basically pricing a hike. >> i don't think you can leave the market at the altar again. i do think they will make it decidedly on hawkish in terms of the hike and make any kind of subsequent moves much more dated.
scarlet: there is a boe landing page. it gives you a snapshot of everything you need to see. right now the rate is at 25 basis points. impliedlook at probability for the bank of england. this is different outlooks for what the boe is likely to do. i don't even know if there is a technical word here for this kind of chart. certainly the options are there for him to raise rates. the data hasn't been great. do you think he could go look? can't leave investors at the altar. i will take back the emergency cut that he did in light of the brexit vote and then go, we are done for now. we'll continue to watch the data. >> i don't think he's going to say we are done for now. he will suggest subsequent -- hikes will be tied to
good economic performance and inflation overshoots and not as pre-committed as this one was. julia: the problem is inflation and he has a problem that other central banks simply don't have at this point. it kind of ties to the note that you wrote recently about the importance of inflation for asset prices and at what point they second-guess themselves. i wrote in the note that the biggest risk asset market is that inflation gets to target because as long as inflation is below -- hikes will be tied tars your friend and you kind of have them over a barrel because if inflation is below target they can't be too hawkish because that would mean inflation was even more below target. once you actually get the target and things are symmetric now i think we're going to see them go back up to a much more normal range. inflation is 1.3 m not 1.9. scarlet: how much of that
depends on good inflation versus that inflation? >> in the case of the u.k. it is slightly different. of thisight say a lot is coming from the exchange rate. we know it's kind of one off. if you actually of this have home-grown wage driven inflation what central banks say they are looking for when they actually get it neither we nor they may be as happy with what they have. julia: central banks at this stage kind of tolerating the wealth effects of the asset price inflation in order to g up demand. >> they are not going to tank the economy just because they got like rich people. they may not have wanted this as an outcome. but it has been working in their flavor -- favor because it has been one of the sources of stimulus.
scarlet: could the boe be the first brick to fall if it does move a little bit too suddenly for investors liking? >> i think so. if we begin to see any sign of second round inflation then all bets are off. how muchill debating of it is the exchange rate and whether any of it is seeping into the domestic environment. it actually does become classic embedded inflation. i think u.k. asset markets will perform poorly and i think that we will be harking back to some of the papers we wrote in the 80's and 90's about what happens when inflation goes up. the downside scheme has been clamped down on by the central bankers. because of this concern about doing damage to the market unit have quickly do they react to a pickup in inflation? the other risk is that they don't react soon enough. >> i think that they have talked
so much about getting to their target. they think they would knowledge they have to move towards equilibrium if they get there. julia: asset prices investors would be accepting of that? >> i think we keep downward pressure. that downward skew that has been curtailed by the fact that we know there has been this central bank reaction function, that would come back into play. julia: maybe we can explain what's going on with inflation. scarlet: steven englander, thank you so much. still ahead, the conversation around russia's meddling in the u.s. election continues today on capitol hill. , google and twitter legal counsel takes the hot seat in washington. this is bloomberg. ♪
scarlet: this is bloomberg markets. i'm scarlet fu. julia: i'm julia chatterley. time for a look at the biggest business stories in the news right now. is the firstnt executive targeted in a civil investigation for allegedly solution by generic drug. this according to a statement by connecticut's attorney general george jetson. the investigation is from 45 states and the district of columbia. mylan said it fully stands behind him. the world's biggest exchange operator cme group plans on introducing the coin futures by the end of the year. the digital currency surged after the announcement with the move could help professional traders and investors get more seriously involved in the cryptocurrency. with miss our interview the chairman terry duffy.
that's your business flash update. scarlet: breaking news out of washington. house financial services committee chairman jeb hensarling will not be running reelection next year according to the dallas morning news. he has released a statement to the paper saying he is announcing he will not seek reelection in 2018 although service in congress remains the greatest privilege of my life i never intended to make a lifetime commitment. i have already stayed far longer than i originally planned. he assumed office in 2013. he was chair of the house republican conference in 2011. chairman of the house financial services committee. let's bring in kevin cirilli. another mainstream republican here stepping down. yes, jeb hensarling announcing his retirement. he is also confirming it to me in a statement. now all attention is going to
turn on who will replace him. there are several names that this race will heat up between including congressman ed royce. he is chairman of the foreign affairs committee and you cannot be chairman of the two committees at once. it will be interesting to see whether he will keep his role within the foreign affairs committee. includemes i am hearing representative himes again and luca meyer. this has been rumbling for some time behind the scenes. right now bombshell report. jeb hensarling leaving. announcing his retirement from financial services and congress. julia: just looking at his statement, he said i never intended to make it a lifetime commitment to serve in congress and i have already stayed far longer than i originally planned. this is a bombshell. what does this mean for the republican party in light of the fact that we have already had a
number of announcements? jeff blake is the another name that comes to mind. scarlet: bob corker. >> if you look at his statement, this is not as -- this is not the criticism that you have seen like corker. this is very different. we are outside of the social media hearing set to begin later this afternoon. chairman read from penciling statement. he says throughout this time my family has graciously sacrificed for my service as the parent of two teenagers my wife and i know there are only a few years left before they leave to make their way in life. he says, although i will not be running for reelection there are 14 months left in my congressional term to continue. graham.senator lindsey all the attention focusing on
who will replace him. he was really someone who sought to build a bridge between the conservative movement of the tea party as well as the more moderate factions. he was an advocate of mike pence. he is someone who really brought in john taylor on the shortlist for the federal reserve and advocating for him to have more prominent role within the republican conservative economics. i'm glad you mentioned the hearing that is about to take place. big tech under the congressional microscope today. you had chuck grassley talking about this earlier, what he wants to hear from the tech giant. let's bring in our tech reporter mark bergen from san francisco. here in new york is marty shanker, chief content officer for bloomberg. let me start with you. techis the story that companies want to tell the senators? >> the narrative is we are in
control of this, we are transparent, we realized there has been an issue in our platform we are taking the appropriate steps. in some ways they are telling congress don't overstep and regulate more than we need to be regulated great place in google both put out post yesterday saying this is the full reach of the event that we found russian trolls. your the steps we made to find additional disclosures. staying with us, kevin cirilli, mark berger and marty shanker. from new york, this is bloomberg. ♪
starting, and the room is filling up. counsel has just entered the room. questions asked about how the companies failed from keeping russians from exploiting their networks and using fake news in the election of 2016. to you onant to come this -- what are senators going to be asking here? why didn't these companies intervene in russian interference? to create rest business is advertising, they do not have the proper vetting processes in place. what they have to do today is to line, to be responsive to the senators, and protect what they think is a core part of their business. scarlet: kevin, how aligned are democrats and republicans on these tech councils?
we have technical issues with kevin, so let me put the question to you, marty. how line do you think democrats and republicans are wooden they grill these facebook, google, and twitter executives? -- are when they grill these executives? there seems to be a thames to keep it from happening again. the question is what you do in response of that in terms of regulation. republicans are very concerned about over regulating businesses. democrats, more aggressive. many of these senators use social media themselves to advance their causes, so they have to be careful how they come across. julia: mark, these companies want to use these hearings to say, look, we are aware of these problems and want to do more to tackle it. give us a sense of what some of these tech companies have already said in terms of how they can tackle this.
companies, they will be happy if the hearing focus is just on the advertising. they can say, listen, we have cleaned up political advertising. facebook is starting to label. googles, as well, they will start new labels that identify the source of political ads. they will interest that they are putting more human editors on the problem. scarlet: the check hearing has begun. we are listening to the chairman of the committee, lindsey graham, speaking. >> i doubt i would be here if it were not for social media, to be honest. the president of the united states saying that, from his point of view, social media was an invaluable tool to help him win an election. i would dare say that every politician up here today asking questions uses your service, and we find it invaluable to
communicate and get our message out. use it and the president music, millions of americans use your technology to share the first step of a grandchild, to doug about good and bad things in our use livesm and i would like to say to all of you that you have enriched america. we have more information available to us because of what you do. we can find an answer to almost any question. we can share aspects of our lives with those who mean the most to us. and we can talk among ourselves in 100 40 characters. some people are better at that than others here at some people should probably do less of it. [laughter] >> but the bottom line is that these technologies can be used to undermine our techniqu -- undermine our democracy and put us at risk. individual value to american lives into our country but can also be used by terrorists to recruit in the cyber world, bring people to
their cause, can be used by foreign governments -- we have seen an example of that in 2016 to create chaos within our democracy. information is power. ideas are the essence of democracy's exchange of ideas, being able to criticize each other is one of the things which harris -- we cherish the most. but we have to be on guard of people using these platforms against us. i think this is the national security challenge of the 21st century. here is what general petraeus said about jihadists online. jihadists have shown facility in exploiting uncovered -- ungoverned spaces in the fund -- his blog -- islam and grow. and they have demonstrated increasing technical expertise, sophistication and media production, and agility in the face and limiting is access.
it is clear our counter efforts and other initiatives to combat extremism online have come and tell now, been inadequate. i think that is a fair statement. the purpose of this hearing is to figure out how we help you. i believe that each of you, in your own way, are taking these problems seriously. the one thing i can say without a doubt is what we are doing collectively is not working. we had a foreign government apparently buying thousands of dollars with of advertising to create discontent and discord in the 2016 election. we had foreign entities going to websites to create fights among americans, like we do not have enough to fight about on our own. so the bottom line is these platforms are being used by people who wish us harm and wish to undercut our way of life here at if you are a man like putin, democracy is your worst nightmare.
if you live in putin's russia, the idea of check -- exchanging information about what is good or bad about your government is something you dare not do because you will not last very long. to those who wish to undermine the american way of life, they have found portals into our society that are intermingled with everyday life, and the challenge of this hearing and of this focus is how we keep the good and deal with the bad. be 100% perfect, but the goal is to be better than we are today. to the extent that legislation can help, we would like to know about what we could do to help. to the extent that the status quo is acceptable, we'll want to be on the record and say it is not. with that, i will turn it over. >> thank you, senator graham, for organizing this fourth subcommittee hearing into russia's meddling in the 2016
election. i am very proud of the work we are doing on this issue. i hope it will continue, and i hope that you and your team and me and my team work as loyal partners in this effort. understanding what happened, how russia applied the varied message in its election interference toolbox to interfere with our democracy, i s an important step toward protecting the integrity of future elections and our democratic process. each hearing gets us closer to that understanding. at our first hearing in march, we talked about the subcommittee's intend to begin a public conversation about the means and methods russia uses to undermine democratic government. from experttimony witnesses who outlined the various tools through which the kremlin exerts influence abroad, from traditional intelligence methods like compromising
corrupt business and political figures to hacking and leaking still information to disinformation, propaganda, and provocation through both traditional media and social media networks. at a hearing in may, i went through a checklist of russia's toolbox to see which methods have been deployed against the united states in 2016. we will learn more today about one of those methods, propaganda, fake news, trolls, from representatives of major american tech companies and from outside experts. the russian government exploited social media platforms as part of a wide-ranging disinformation campaign targeted against america and american voters. as we explore how that campaign worked and how we might better insulate ourselves in the future, let's recap what we have learned in our hearing and what we still do not know. we saw the hacking and theft of political information by russia,
something no serious person can dispute. leaks of damaging material were the fruits of that crime. we know they happened, but we still do not know how the decisions were made about what to leak and when and who made them. it has been reported that roger stone communicated through a cut out, and we learned last week that the ceo of cambridge alan nunnelee the cup -- cambridge analytics offered assistance to julian assange. and we now have the statement of the offense prepared by the mueller probe. but we do not know the full story of who coordinated with wikileaks or even directly with russian hackers. another method we have heard about is the exploitation of shady business and financial ties. we have heard testimony from a number of witnesses here and it hearings of the helsinki omission that the u.s. has become a haven for secretive
shell corporations that can allow foreign teams to channel funds to compromise individuals and exert political influence. nothing known in to about the president's business dealings in russia or with russians except that he has long chased after deals there. the president's tax returns will clarify a great deal and hopefully put an end to some of these questions, but those have not been made public. history ofrt's long suspicious business relationships with russian and ukrainian oligarchs have yielded his indictment, which exposed great -- gaping holes in enforcement and of picking up on false statements and international money laundering. if you can use his alleged scheme to buy property, why not use it to make anonymous political executors? or spend money to influence elections? we still do not have answers about the president's relationship with felix it are, who was changed -- who was
working with a jump of will after the presidential campaign begun. we have not been able to his big with them so we do not have answers on the fund. we know the russians tried to corrupt and compromise political figures to exert influence over them. we do not know to what extent that happened here, but we know the trump campaign and administration has had a very bad habit of forgetting about meetings with russians. still the onlys person to have been held accountable for hiding a proper context with russia, even as more and more such contacts have emerged in the intervening months. paul manafort, jared kushner, and the president's son met with the russian lower your -- lawyer in june 2016. has amended his security clearance application multiple times to reflect more than 100 foreign contacts he initially left off, including meetings with a russian
ambassador and the head of a major russian bank. judiciarys of the committee sent letters to the white house in june and july of this year with questions about the status of mr. kushner's clearance. to this day, this questions have been ignored. newly six months after we first ran through that checklist them a we still have more questions than answers. my sincere hope is that we find those answers so that we accomplish this subcommittee's primary purpose, which is to help us learn how to protect the country from foreign political influence in our elections. today we have an opportunity to learn of -- to learn more about how russia exploits social media and to share some of the details with the public. i appreciate the cooperation of facebook, twitter, and google in sending representatives here today and working with our staff over the last several weeks to voluntarily produce information. the intelligence community assessment published in january reported that moscow's influence
government followed a russian messaging strategy that blends covert intelligence operations such as cyber activity with overt efforts by russian government agencies, state-funded media, third-party intermediaries, and paid social media users or trolls. -- statetay back backed networks are thatminators of messages undermine the legitimacy of western governments. social media control companies help to amplify those messages, often posing as americans on facebook and twitter to launder russian propaganda messages and obscure the russian origin. according to a ukrainian scholar, russian media "implant propaganda narratives and the international media sphere and do so with the intent of having
them picked up on social networks." aaditional media will pick up fake story from social media and give it legitimacy. when narrative laundering is a these narratives can become part of the mainstream media sphere. how can western democracies interrupt this vicious cycle while respecting our commitment to freedom of speech? greater transparency and disclosure about these was of information, especially paid political advertising, is a necessary first step, but our adversaries have access to tools will be on traditional political advertising. sociale using our own networks, friendships, families, biases, and viewpoints against as to achieve the political ends. i look forward to hearing from when this is about the ways we can protect the camp unity -- protect the community. express my appreciation to our chairman, senator graham.
thank you very much, mr. chairman. i very much appreciate your courtesy in late permitting regular members to be here and participate. i very much appreciate it. i had a briefing last week by outside technical experts. i saw really for the first time how effectively russia has harnessed the tremendous and, quite frankly, frightening power of social media. they showed us how millions of americans are reached and how russia successfully used fake itself, to imbed ande and many plate opinion actions -- and manipulate opinions and actions and so it should not be news that russia interviewed in the election, but what is staggering in our day fully comprehend is how easily and successfully they turned
modern technologies to their advantage. attackssed covert cyber to obtain and release information to impact the election, as well as propaganda campaigns that relied heavily on theformerly russia today, state run television network, and the internet research agency, a group of professional trolls reportedly financed by a close putin ally with ties to russian intelligence. documents and information that we have received from facebook, twitter, and google confirmed this. just a fee more facts. facebook has identified 470 accounts tied to the internet research agency. twitter has identified 2752 ira-related accounts and almost linked accounts
that generated automated election content. from what we have seen so far, russian-backed trolls used fake accounts on facebook for more than 3000 paid advertisements. sowthose ads sought to discord and amplified racial and social divisions among american voters. they exploited hot button topics such as immigration, gun rights, lgbt, and racial issues to target both conservative and progressive audiences. so, mr. chairman and ranking member, this is really a critical hearing because it is the first time we will have heard, at least to my knowledge, from the three agencies about and,ly what is going on
most importantly, what they are prepared to do to stop it. thank you very much. >> [inaudible] one, i want to thank you all for coming. you have been very helpful and cooperative. to my left is the general counsel of facebook. thank you for coming. we have acting general counsel of twitter. the director of law-enforcement and information security at google. when reading your resumes, i am sure you got these jobs because you are very good at what you do. graham, ranking never white house, and a string grist -- distinguished members, thank you for the opportunity to appear before you today.
i am colin stretch. since july 2013, i have served as general counsel of facebook. we appreciate your hard work as you continue to seek more effective ways to combat crime, terrorism, and all other threats to national security. we are deeply concerned about all of these threats. at facebook, we create innovative technology that gives people the power to build community and bring the world closer together. we are proud that over 2 billion people around the world come to facebook every month to share with friends and family, to learn about new products and services, to volunteer or donate to organizations they care about, and to help out in a crisis. being at the forefront of technology also means being at the forefront of new legal, security, and policy challenges. our teams come to work every day to confront the challenges head-on. thousands of facebook employees around the world work to make facebook a place where both
personal expression and personal safety are protected and respected. i am here today to address two important issues for our platform and others like it, the threat of extremist content and the efforts by foreign actors to interfere with the 2016 election. safe on facebook is critical to our mission. there is no place on facebook for terrorism or hate. postsove terrorist and that support terrorists as soon as we become aware of them. in the rare cases where we uncover evidence of imminent harm, we probably inform authorities. while there are challenges, we think technology and facebook can be part of the solution. we also believe we have an important role to play in the democratic process and a responsibility to protect it on our platform. when it comes to the 20 16th election, i want to be clear -- we take what happened on facebook very seriously.
the foreign interference we saw is reprehensible. that foreign actors hiding behind fake accounts of used our platform and other internet services to try to sow division and discord and to try to undermine the election is directly contrary to our values and goes against everything facebook stands for. we build tools to help people connect, and we recognize that facebook has become an important tool for political engagement and debate. our goal is to bring people closer together. these foreign actors sought to drive people apart. investigation, which continues, we have found that foreign actors used fake accounts to place ads on facebook and instagram that reached millions of americans over two years and those ads are used to promote pages that posted more content. people shared these posts, spreading them further.
many of these ads and posts are inflammatory. some are downright offensive. particularlyll be painful to communities that with this content believing it to be authentic. they have every right to expect more from us, and we are determined to do better. in aggregate, these ads and posts were a small fraction of the overall content on facebook, but any amount is too much. all of these accounts and pages violated our policies, and we removed them. going forward, we are making significant investments, hiring more and reviewers, doubling our security and engineering efforts, putting in place tighter ad content restrictions, launching new tools to improve at transparency, and requiring more information from political ad buyers. we're building artificial intelligence to locate that actors. we are working more closely with
industry -- with industry to share information on how to identify and prevent threats so we can all respond faster and more effectively. we are expanding our efforts to work with law enforcement. that actors are not going to stop their efforts. we know we will all have to keep learning and improving to stay ahead of them. that is why i want to thank you for this investigation. we look forward to the conclusions you will ultimately share with the american public, and i look forward to your questions. chairman graham, ranking member whitehouse, and members of the committee, twitter understands the importance of the committee's inquiry into extremist content and russian disinformation in the 2016 alexion, and we appreciate the opportunity to appear. deeply concerning to our company and the broader twitter community. we are committed to providing a service that fosters and facilitates free and open
democratic debate and that promotes positive change in the world. we are troubled reports that the power of twitter was misused by foreign actors for the purpose of influencing the u.s. presidential election and undermining public safety. the abuse of our platform to manipulate elections is a new challenge for us and one we are determined to meet. today, we intend to show the committee has serious we are about addressing this new threat by explaining the work we're doing to understand what happened and to ensure it does not happen again. 2016e time of the election, we observed instances and acted on them of automated and malicious activity. as we learn more about the scope of the broader problem, we resolved to strengthen our systems going forward. elections continue all the time. so our first priority was to do all we could to block and remove malicious activity from interfering with our users'
experience. we created dedicated teams within twitter to enhance the quality of the information our users see and to block malicious activity wherever and whenever we find it. those teams continue to work every day to ensure twitter remains a safe, open, transparent, and positive platform. we have also launched a retrospective review to find russian efforts to influence the 2016 election through automation, coordinated activity, an advertisement. while that review is still underway, we have made the decision to share what we know today. transparencyst of and out of appreciation for the urgency of this matter, we do so recognizing that our findings may be supplemented as we work with committee staff and other companies, discover more facts, and gain a greater understanding of these events. my written testimony he tells
the methodology and current findings of the review in detail. we studied tweets from september 2016.ovember 15, we found automated and coordinated activity of interest and determined that the number of accounts we could link to russia and that were tweeting election-related content was comparatively small, around one-100 of a percent of the total twitter accounts. election have% of an related tweets people saw came from a russian-linked automated account. but we did observe instances where russian-linked activity was more pronounced, and we have uncovered more accounts linked to the russian-based internet research agency as a result of our review. we also determined that advertisements by russia today, seven small accounts, was related to the election and violated the policies that existed at the time or that have since been implemented. those users as
advertisers and will donate that revenue to academic research into the use of twitter during elections and for civic engagement. we are making meaningful improvements based on our findings. when asked industry-leading changes to our advertising policies to help protect our platforms rum unwanted content here and we are enhancing our sharpening tools for stopping malicious activity, and increasing transparency to promote public understanding in all of these areas. these improvements will further our efforts to fight terrorist content and disinformation. we will continue confronting the challenges for as long as malicious actors seek to abuse our systems and we will need to evolve to stay ahead of new tactics. we have further concerns about russian actors' use of twitter to disrupt the 20 16th election and about our commitment to addressing this issue -- to 2016 election
and we agree that we must do better to prevent this and we hope our appearance today and the work we have undertaken to mistreats a commitment to working with you, industry partners, and other stakeholders to ensure that the experience 2016 never happens again. cooperation is essential that we cannot do this alone. to combineproach is information and ideas to increase our collective knowledge, working within the broader community, we will continue to test, learn, share, and to improve so that our product remains effective and safe. i look forward to answering your questions. >> chairman, ranking member, distinguished members of a thank you for inviting us to participate in the hearing and for your leadership on this challenging and an important issue. enforcementof law
and information security at google, i work with thousands of people across teams at google tasked with protecting the security of our network and user data. i previously served the computer crime and intellectual property commission and work on crimes such as hacking. services provide real benefits to our society. we recognize that our services can be misused if sponsored attackers are particularly pernicious. they are well-resourced, sophisticated, patient, and often by design difficult to recognize. protecting our platforms from state-sponsored interference is a challenge we began tackling 16thbefore the 20 presidential election. we dedicated significant resources to help protect our platforms from such attacks, by maintaining cutting-edge
defensive systems and building advanced security tools directly into our consumer products. we have a range of tools to protect and prevent bad actors from putting content on our platforms. youtube uses an array of signals to catch those trying to artificially inflate view counts are the number of subscribers. with respect to the election, we have been looking across our products to understand whether individuals appear to be connected to government backed entities work disseminating information and the u.s. for the purpose of interfering with the election. this is based on research conducted by the jigsaw group, the investigatory work of our security team, and means provided by other companies. while -- it included a broad review of all ads from june 2015 to the election, there
were political fire systems and there was connection to russia. we found you above account that appeared to be engaged in activities associated with known or suspected government-backed entities and two accounts spent roughly $4700 in connection with .he 2016 election our investigation also focused on other platforms. on youtube, we found 18 channels with approximately 1100 videos that were uploaded by individuals who we suspect are associated with this effort and that contained political content. these videos mostly had low view counts, just 3% of them had more than a 5000 views and hourstuted only around 43 of youtube content. while this is relatively small, people watch over one billion hours of youtube content per day, 400 hours of content uploaded every minute, we
understand that any misuse of our platforms for this purpose can be very serious. youtube's videos were not targeted to any particular segment of the u.s. population. that is not a feature, but we links werebserved frequently posted to other social media platforms. we believe the limited amount of activity we found is a result of the safeguards we have in place in advance of an election. the products to not lend themselves to the kinds of targeting or viral dissemination that these actors seem to prefer, but we are committed to continuing to improve our existing security measures to help prevent the kind of abuse. as part of our commitment, we are making our political advertising more transparent, easier to understand, and even more secure. , we will release a transparency report for election ads and pair that with a library of election and at content that will be accessible to researchers. going forward, users will be
able to find the name of any advertiser running election-related ads on search, youtube, or google display network with one click on an icon above the ad. and we will be increasing safeguards in place to ensure users are in compliance with our covering election ads. on the top of extremist content, we developed rigorous policies and programs to make sure the use of our platforms to spread hate or insight of violence are prohibited. we use a mixture of technology and review to enforce our guidelines and continue to invest in this approach. we are committed to doing our part and recognize that we must work together across governments, civil society, and the private sector to address these conflicts and issues here we look forward to continuing to work with this committee as it takes on this important issue. thank you for your time, and i look forward to your question. >> thank you. we will do five-minute rounds and stay as long as necessary.
i will start here. what nations do you worry about other than russia interfering in our elections? any come to the top of your head? >> thank you for the question. we worry about nation state actors really from around the globe. we stood up a14, threat intelligence team that was dedicated primarily to reviewing and monitoring for attacks from threat actors died to nationstates -- tied. to nationstates that was mostly directed at traditional cybersecurity, account compromise, surveillance, dissemination of stolen information. it is only recently that we have seen this threat evolved into what we were talking about, what i was talking about in my testimony, the dissemination of information --
misinformation. in terms of specific countries, it really is a global threat. we would certainly be happy to come back to the committee and provide more details on specific actors. >> is that true for the rest of you? >> true for us, as well. as we said in written testimony, we see a disproportionate amount of spam or automated accounts coming out of russia, but our tools and technology are agnostic, obviously. senator graham: could iran or north korea potentially do this? >> certainly potentially. the internet -- senator graham: talk about the time to review city started picking up foreign interference two years ago, is that right? >> we have been tracking threat actors for several years, yes. senator graham: before the 2016
election cycle? >> yes, correct. you findraham: did activity after the election? >> yes, we did. senator graham: what happened after the election? >> following the election, the activity we have seen really continued. in the sense that if you view the activity as a whole, we saw this concerted effort to sow division and discord. in the wake of the election and now president trump's election, we saw a lot of activity fomenting discord about the validity of his election. senator graham: so this continued after his election. >> a continued until after we disabled the accounts. you?or graham: what about >> was a similar activity. on the advertising side, it was interesting. we saw activity dropped off
after the election. accountsutomated at -- continue, so we are removed our platform. >> same is true for google. the limited use of our platforms certainly decreased once we terminated accounts, and we would expect that. senator graham: did you see any activity in the primary, mr. stretch? >> the activity that is eligible due to the internet research agency really started in 2015 and was ongoing through the primary, yes. senator graham: were these ads pro-clinton, anti-clinton, or could you tell? these activities? >> viewed in the aggregate, the really appears, to address a wide range of hot button topics and appears directed at fomenting discord and in flaming discourse. senator graham: in terms of volume, again, how much volume
are we talking about? 90% approximately of the volume that we saw on the ad issues-based,o be primarily, and a much smaller proportion erected at a particular candidate. thator graham: i think is one in 23,000 for facebook. >> correct. in terms of the total volume of material on the site, it is a very stop percentage for we estimate the internet research agency content was approximately in04% of the content newsfeed during the time in question. senator graham: i will come back with a jihadist for round two, but russia as a nationstate started interfering in the election cycle back in 2015, and they continued after the election.
they were election, trying to create discord between americans, most of it directed against clinton. after the election, you saw russian-tight groups and organizations trying to undermine president trump's legitimacy -- is that what you saw on facebook? >> that is an accurate statement. sure i can characterize on our network which way the content went. senator graham: thank you. whitehouse: i think we can all agree that the russians did interfere and metal in the 2016 elections. your observations are consistent with what our intelligence community reports. is that correct? >> that is correct, senator. looks correct. >> that is true.
senator whitehouse: ok. and i gather that all of your companies have moved beyond any notion that your job is only to provide a platform and whatever goes across it is not your affair? >> senator, our commitment to addressing this problem is unwavering. we take this very seriously and are committed to investing as necessary to prevent this from happening. >> absolutely agree with mr. stretch. this kind of activity creates a bad user experience and distressed with the platform, so we are committed to working to get better at solving this problem. >> same for google. we take this very seriously. we have made changes and will continue to get better. senator whitehouse: ultimately, you are american companies and threats to american election security and threats to american peace and order of things that concern you greatly, correct? >> that is certainly correct. >> agree. >> that is right. senator whitehouse: what i would
like to do, and i do not have the time here, is to ask you all to answer a question for the us the which is -- give key benchmarks of how you have improved at dealing with this problem in recent months or recent years, what your goal posts are ahead that you have not yet achieved that you are slated or intend to achieve to deal with this problem. three would be, what does success look like to you? say can you come to us and we have accomplished x, and therefore you do not need to worry about legislating in this space or creating regulations or holding more hearings because we have now got america's back. can you do that for me? >> yes. senator whitehouse: you are all also corporations that have headquarters in the state of
california. california has a state law regarding disclosure. presumably you comply with that state law with regard to customers in california. there lessons and recommendations that you would the for us in evaluating effectiveness of the california disclosure law? and given the short amount of time, i suppose we should -- give me just a very brief -- do you follow that law? in very brief response. then we can flesh out in a question for the record how much of a model that might be for this committee to look at. >> we comply with all applicable law. in terms of disclosure going forward, we made an announcement last week that really drew on some of the ideas from the honest ads act, which was introduced, intended to bring
ads transparency into the political realm, creating a repository of searchable ads, providing innovative ways to enable advertisers to meet their disclosure requirements, and requiring augmentation and information -- requiring documentation and information to ensure that advertisers are not running political ads on facebook in violation of federal election law. senator whitehouse: let me ask what will probably be my last question of this round. as ire all prepared, understand it, to undertake to make sure that you can trace content that goes across your platform that qualifies for concern in this area back to a legitimate source. ityou know -- so you know if
is a russian running it or if it is an imaginary entity running it. how do you deal with the problem of a legitimate and lawful, but phony, american show corporation, one that calls itself, say, americans for puppies and prosperity, has a dropbox as its address and a $15 million check in its bank book that it is using to spend to manipulate election outcomes? i think that is a problem. we're continuing to look into how to get to know your client. like mr. stretch said, we are proud of the work we have done around ads transparency and the center we're building. i think that kind of center allows the american citizen to be educated about who is running it,d, who is paying for what other ads they are putting out into the world, and what they're targeting. we believe we will have to
figure out a good process to understand who the customers are that are signing the contract with twitter. senator whitehouse: you admit that you trace it back to an american corporation, call it americans for puppies and prosperity, and it is a shell corporation, and you do not know who is behind it. it could be vladimir putin or a powerful american special interest or north koreans or iranians -- you need to be up to penetrate the obscurity of the shell corporation, correct? >> we are working on the best approach on getting to know the clients and getting to know who is behind the entities signing up for advertising. senator whitehouse: thank you. thank you, mr. chairman. >> thank you, mr. chairman. thank you for the senators for leading this discussion. thank you for further cooperation. the press has reported that the russian government placed ads on facebook that were largely aimed at influencing the election.
so i want to highlight what i considered an inaccuracy in that reporting. the committee is reviewing the ads that facebook produced over all the ads do not support a specific candidate, either republican or democrat, and about half of the ads reviewed were placed after the election and a large majority exploit controversial issues in an ividet to further de us. there are stories spread about abuse of black americans by law enforcement. the ads are clearly intending to worsen racial tensions and possibly violence in cities. it might be true that these ads were intended to influence the elections, but it is important to be clear that the nature of not have- russia does loyalty to a political party in the united states. their goal is to divide us and discredit our democracy.
a question, mr. stretch -- the ads that facebook has produced are all from internet research agency. what is facebook doing to identify ads and content placed by the bad actors? >> thank you, senator, for the question. we are focused broadly on addressing questions of authenticity around the content placed on our platform and the investments we are making around security and around transparency sweep across the entire platform. for example, the learning that election from the 2016 and from our investigation into it now informs the automated ands that we use to detect remove fake accounts from anywhere. >> has facebook produced all the locatedcontents it has from russian sources placed prior to the election, and of
facebook has not, will facebook focus on producing those ads? >> yes, we have identified industry have produced everything we have identified that is a product of what we call coordinated in authentic activity from facebook, and we are continuing to investigate. we commit to keep the committee up-to-date on any further progress in our investigation. >> that would include all ads placed from russian sources? >> all ads from russian sources that -- >> with others? >> that are inauthentic. there are many advertisements cross-border that are legitimate that we have not produced. >> facebook identified more than 3000 and purchases during the 2016 election that had links to russia. russian agents posted messages that reached 126 million users.
the posts and ads exemplified divisive political issues. twitter identified over 200 accounts linked to russian groups. rt, arrested today, spent approximately 274,000 targeting the u.s. markets. publishedian agents more than 121,000 messages on twitter. google found ads by russian accounts that used youtube or google. russian agents uploaded about 1000 videos on youtube. questions to each of you and a short answer on the stupid questions i will put together. to each company, starting with mr. stretch -- have you completed internal investigations to identify all accounts of advertisements and
posts with connections to rush of the purchased ads in the lead up to the 2016 election? if not, what is the timeline for completion? >> senator, as i stated in testimony, the investigation continues. we expect to keep the committee up-to-date on any further discoveries. >> same goes for twitter. we continue to work with your staff. september 1 through november 15 is the relevant time, but we're working on other investigations. theor google, as investigation continues, we will keep the committee up-to-date. >> ok, and one i would like you to give me answers in writing, could you provide an update on what your internal investigations have found? be specific with regard to the number of accounts and total value of the advertisements. my time is up, mr. chairman. chairman. mr.
mr. stretch, we know that russian operatives built misleading pages, like black matters u.s. and united muslims of america, to attract facebook users. they then exploited a powerful facebook tool called custom audiences to track down those users and send them targeted messages. can you explain who was targeted using facebook's custom audiences tool? >> thank you for the question, senator. you are correct that much of the content we have seen is socialally imitative of causes, very meaningful ones, manyen me ended -- for
members, it is what makes this content so vile, so cynical, its attempt to exploit divisions in our society. in terms of the advertising tools that were used to promote these pages that were masquerading essentially, the advertising targeting that was used was a combination of very broad geographic targeting. was of the ads, about 75%, targeted to the united states as a whole. about one-quarter of the ads were targeted at a more granular level, to states. they were targeted to interest groups. so we have what we call like-based or interest-based targeting that was intended to attract people who were following the causes you have identified to subscribe to those pages. scarlet: we are listening into
the hearing on capitol hill, the senate judiciary subcommittee on crime and terrorism. you have legal representatives from facebook, twitter, and google. i thought was interesting were the questions that senator lindsey graham asked with regards to the activity that they have seen. they saw a lot of activity in the lead up to the elections beginning at around 2015 after the general election. but the activities a lot of the company's sock kind of shifted once you got to the election and the aftermath of the election -- the activities a lot of these companies saw shifted. then it turned to the legitimacy of president trump. julia: and there was a reluctance from general counsel to talk about which direction the content we are seeing created on their platforms in promotion of the direction, they would not talk about which direction it was going in. senator sheldon whitehouse had critical questions, one about
benchmarks and tackling this. thehe asked about california state laws on complying with some of the details and the shell companies, of course. this and how get well do they know the clients? scarlet: that is something that will be writing and submitting to the committees. let's bring in our tech reporter who has been listening in on the hearing. what was your big take away? >> i think it is interesting right now that the senators are trying to get the tech companies to put parameters on this. the companies came out trying to cooperate and seem proactive, but the senators are driving holes into what they can actually do versus what they say they are going to do. all the companies agreed that they may not have found all the ads and posts related to russian meddling into the election. they all agreed that there could doubt that russians did
try to influence the u.s. election. something you mentioned earlier that i thought was very interesting is the fact that on these platforms, the tone changed after the auction, that the russian actors were trying to spread discord about politics in general in the u.s., turned their attention to trying to de legitimized trump's election and say there were doubts about the legitimacy of his presidency. julia: i would expect the president to jump on that, suggesting that if there was russian influence to try to get him elected thomas and that was not the case afterwards. we mentioned the fact that these guys are going to come back to some of the questions. we get no pushback from them on whether or not interfering in some of the content actually restricts the freedom of -- would youwhich
have expected them to say anything about this? >> they will be careful. they want to some cooperative. but they do not want to do anything that would restrict the freedom of information flow on their platforms, especially the freedom of speech. the companies have all said, yes, we care very deeply about the integrity of your selections and understand it is very central to how democracy works in america. of course, another thing central is free speech. julia: a report live from that subcommittee. we will continue this discussion. stay with us. from new york, this is bloomberg. ♪ who knew that phones would start doing everything?
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