The Abominable No Man Strikes Again

The House recently passed the JOBS Act (Jumpstart Our Business Startups) with the assistance of 158 Democrats. Then it went to the Senate, where it was crushed by the DOPES (Democrats Opposing Practically Everything Sensible). Majority Leader Harry Reid led a team of job-killers which included Majority Whip Dick Durbin (D-Ill), Mary Landrieu (D-La), Carl Levin (D-Mich) and Jacke Reed (D-R.I.).

Even Barack Obama supported the bill.

The bill raised the shareholder threshold for companies to go public but created a fast track for companies to avoid the worst provisions of Sarbanes-Oxley and Dodd-Frank regulations and roadblocks for five years. This bill was a boon to small business startups, which everyone except the DOPES agrees is the key to getting the economy moving again. Over the past few years, there was a precipitous drop in American IPOs (Initial Public Offerings), largely as a result of the deleterious regulations of Sarbanes-Oxley and Dodd-Frank, and this was a way to get past that.

No dice, said the DOPES. And this is despite the fact that the Treasury Department’s own experts estimate that the throat-gripping IPO regulations of Sarbanes-Oxley and Dodd-Frank have probably cost as many as 22 million jobs (yes, you read that right—22 million). Technically, Treasury was saying those were jobs "not created." You want a little irony? Back in the House, Barney Frank (D-Mass) himself supported the JOBS Act, along with his heir-apparent Maxine Waters (D-Ca).

It’s very hard to understand the DOPES’ reasoning. Clearly, if implemented quickly, this act would have given the Democrats and their leader in the White House another talking point about being pro-business. It’s nonsense to think that, of course, but jobs would likely have been created in substantial numbers very quickly had the JOBS Act passed. It’s not the stock market “recovery” that voters are looking at in large part. They are looking at pernicious unemployment numbers, and this would have worked to the Democrats’ advantage by possibly reducing those persistent 8%+ numbers.

Reid’s quashing of this very sensible bill instead proves that the recalcitrant Democrats in the Senate don’t fully understand new realities, even though they call themselves progressives. One of the major features of the JOBS Act was that it allowed companies to solicit purchases online, following the CraigsList and E-Bay models. That meant that entrepreneurs could raise money online in $100 or less increments per investor, somewhat akin to the old “penny stocks” concept. Senator Jack Reed pooh-poohed the idea that such a model would work, saying that the model flies in the face of decades-old securities regulation.

That was the point, of course, but Reed doesn’t like it. Most of those regulations that Reid and Reed love so much were imposed originally during the Great Depression, at a time when many people had no telephones and the Internet wasn’t even a gleam in the eye of yet-unborn inventor Al Gore. But Reed snarkily said that E-Bay and Craigslist selling used tennis shoes and unwanted clothing is not the same thing as purchasing small stock offerings. The gummint must vet it first. Reed ignores the fact that those same private entities also sell outrageously expensive jewelry, antiques and real estate. But Reed thinks $100 online investments require more government regulation than million dollar trades in real property.

The other advantage of using the Internet for funding startups is the speed with which it can be done. The faster the startups can fund and get to work, the sooner jobs are created and unemployment reduced. But Reid and the other DOPES, who claim to hate Wall Street, have chosen to protect those old Wall Street firms and their arthritic way of doing business over innovation and fresh ways of raising money. “Progressives” indeed. It’s much faster and much less expensive for a small, viable startup to post an offering on the Internet than to hire huge prospectus teams, regulations experts, and an entire mailing and telephoning team to get the word out. Yet that creaky old system is what the Senate DOPES are protecting.

Online investors would get more realistic and useful information through the Internet publication than the Obama administration got about Solyndra using all the traditional methods. And savvy small private investors would do considerably more investigation into the company for a $100 investment than the Obamists did with the half-billion dollars of taxpayer money wasted on the Solyndra scam.

The JOBS Act would have lifted the threshold for most Securities and Exchange Commission (SEC) regulations and mandates from 500 to 1,000 shareholders before the regulations kicked in (2,000 for community banks). Moreover, it would have removed the restrictions on stock ownership for company employees. Who is more likely to know the viability of a startup than employees who are willing to invest their own hard-earned money in the company they work for? Insider trading rules should be applied to institutional investors and management in this particular instance rather than to employees who want to share in the wealth.

If there is nothing else to be learned from this, it must teach us that it’s time to get rid of Democratic Senators who are still in love with Roosevelt-era rules and regulations which were designed in a much more primitive economy. We must rid ourselves of those who don’t know the difference between logical and necessary regulation and gross overregulation. We must elect younger, savvier, pro-business Senators who understand the verities of the twenty-first century. And if you won’t take my word for it, ask Barney Frank and Maxine Waters.