The world’s latest Amazon watcher: the Federal Reserve
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The world’s latest Amazon watcher: the Federal Reserve

Amazon is an Ecommerce giant, and its ambitions have moved from being an online bookseller in the 90s to an “everything shop” in the 2000s, to… well, pretty much everything today. Its tentacles extend into areas as diverse as grocery shopping and cloud hosting, and it’s got its eyes on another prize: the finance world. It’s long been known that U.S. banks have been keeping a close eye on these developments. But now, apparently, so is the Federal Reserve (Fed).

Amazon’s share price has risen by 38% year to date

graph 3005 amazon

SOURCE: Yahoo Finance

Citing anonymous sources, Bloomberg has reported that the Fed’s vice chairman, Randal Quarles, is keeping a close eye on Amazon. Allegedly, Mr. Quarles “is monitoring the potential for disruption to the industry and has expressed concern about how tech companies could provide financial services outside of regulators’ oversight.” Mr. Quarles hasn’t made any attempts at intervention – and, in any case, “the Fed’s influence would be limited” according to Bloomberg.

Nonetheless, this will be welcome news for U.S. banks, which can no doubt remember that there used to be bookshops on the high street. And the Fed – as cautious as it’s being – is still the largest banking regulator in the world’s biggest economy. It wouldn’t be alone in posing tough questions to Big Tech: the current U.S. President is an outspoken critic of Amazon, and a spate of negative headlines over privacy earlier this year has dented companies like Facebook and Google’s popularity with the public.

So far, all Amazon’s really done is explore the possibility that it could offer financial products similar to checking accounts in partnership with banks. And since the Fed has extremely limited reach into non-bank companies, the only route available to it in the policing of these companies would be through those banking partnerships. It would take a designation by the Financial Stability Oversight Council (which Quarles is not a voting member of) to change that.

Amazon is a huge political force, and one of the U.S.’s biggest lobbyists. One of the groups to which it belongs – Financial Innovation Now – spoke to the issue. The group’s executive director, Brian Peters, said: “It’s not surprising to me that another federal financial regulator is thinking through this and, at least in this case, asking the traditional questions about safety and soundness. We welcome that. We want to be regulated at the federal level.”

Both Amazon and the Fed have declined to requests for comment on this story.

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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