The Jumpstart Our Business Startups Act (JOBS) had everything going for it. It garnered more than 400 votes in the House of Representatives last week. It had the backing of Senate Republican leader Mitch McConnell and was fast-tracked onto the Senate calendar by majority leader Harry Reid. President Obama, he of the veto pen, publicly expressed his support.
And, of course, it had a politically bulletproof acronym: After all, who could vote against jobs?
But after a group of Democratic senators – and the Securities and Exchange Commission – scrutinized the bill, its race to the president’s desk has been impeded.
Democrats ultimately want the JOBS Act to pass, they insist, but they're looking for assurances that investors will be protected, especially those financing new businesses using social media and the Internet, or "crowdfunding."
“We’re not trying to kill the bill,” said Sen. Mary Landrieu (D) of Louisiana on the Senate floor Thursday. “If [the bill is] not done right, it's going to ruin the best chance we’ve had in decades to get capital into the hands of businesses.”
Sens. Landrieu, Carl Levin (D) of Michigan, and Jack Reed (D) of Rhode Island are co-sponsoring an amendment to the bill, which will be up for debate when the Senate returns from recess on Monday. That represents at least a small delay for the JOBS Act, which Senator Levin said could be voted on as early as Thursday.
But Democrats’ rhetoric doesn’t sound like they’re out to institute a few constructive tweaks. In fact, they liken the JOBS Act to a regulatory rollback that all but ensures another round of fraud on a par with some of America’s biggest financial debacles.
“This half-boiled concoction of ill-conceived ideas skirts, evades, and nullifies investor protection in market transparency standards that were enacted in response to the dot-com crash, the Enron debacle, and the litany of bubbles and bursts that have cost legions of unsuspecting Americans their savings, their jobs, and their retirement,” Senator Durbin said.
While many organizations, including AFL-CIO and the Council of Institutional Investors – the nation’s largest labor union and its largest group of pension plans – lodged concerns about the legislation, Levin said that the letter from the SEC “was perhaps the most powerful of all.”
Among other concerns, Ms. Schapiro’s letter says that the JOBS Act would:
• Undo regulations instituted after the dot-com crash that separate stock research analysts from bankers underwriting an initial public offering (IPO), a division meant to keep analytical advice given to investors untainted.
• Unnecessarily loosen auditing restrictions for some small companies heading toward IPOs.
• Fail to provide adequate consumer safeguards for crowdfunding.
“We all should have learned from the painful recent past that reducing investor protections against fraud and abuse will not build a strong economy and create jobs – quite the opposite,” Levin said on a conference call with reporters.
Tucked at the end of Democrats' amendment to the bill, however, are two items with nothing to do with investor protections – but that have heavy Democratic support.
First, Democratic senators seek an expansion of credit for the Export-Import Bank, which helps finance the sale of US goods abroad where credit is unreliable or unavailable. In addition, they’re seeking a $1 billion expansion of a venture capital program administered by the Small Business Administration.
Senate Republicans, who had been publicly urging the rapid adoption of the bill from nearly the moment it moved between ends of the Capitol, scorched Democrats for standing in the way of bipartisan legislation.
“They want to pick a fight rather than get this bill to the president’s desk,” Senator McConnell said in a speech on the Senate floor Thursday. “If you’re looking for the reason this Congress has a 9 percent approval rating, this is it.”
Democrats, of course, see things differently.
“Instead of trying to scuttle the bill, we’re trying to make sure that investors are on board,” Senator Reed said in a conference call with reporters. “In some place other than steerage.”
If amendments are added to the House bill, the two chambers would have to reconcile their differences in a conference committee before the bill could become law.