One would think that Congress would be doing anything to create jobs. Instead, they seem to want to kill jobs. Let’s look at the Dodd financial overhaul bill as one example of this trend.
One section of the bill deals with private investment in small “start up” companies. These companies are today’s version of yesterday’s Microsoft, Apple, Google, Amazon, Yahoo, etc. They begin with one or two people who have a vision for the future. They start in someone’s garage or basement, with no money but a brilliant idea. And, their business grows.
According to a 2009 Kaufman Foundation study, such firms are less than 1% of all companies yet generate about 10% of new jobs.
But, to grow, they need capital. In other words, they need investors who are willing to take a chance with their own money, and provide funds to make these those companies grow. Dodd’s bill will make that far more difficult.
Under current law, only “accredited” investors can invest in these companies, and, one is automatically “accredited if they can demonstrate a net worth of $1million, or, annual income of $250,000. And, if an investor is “accredited” they can invest immediately.
I don’t recall any small “start up” contributing to the financial meltdown, but, Senator Dodd (D. Ct) has apparently decided that investment in small “start ups” needs to be more heavily regulated by the federal government. Under his proposed bill, the “start ups” seeking investors are required to file with the Securities and Exchange Commission, and “endure a 120 day review” before anyone can invest. And, under the bill, to be an “accredited” investor, one must demonstrate an net worth of $2.3 million and an annual income of $450,000.
The Angel Capital Association, a trade group, estimates that these provisions would disqualify about 77% of current accredited investors.
This administration has apparently decided it is far more important to regulate your health care, and the future of tomorrow’s Google’s and Yahoo’s, than to regulate the flow of illegal immigrants into this country.
Am I missing something?
UPDATE (Jim): Well at least the Republicans (and one Democrat Senator Ben Nelson) know its an incomplete bill. The Senate failed to vote cloture on the Dodd finance bill. It’s not unexpected. The Republicans were not going to allow this bill to move forward until “the bailout/too big to fail” provision was reformed.
It’s not the only point in the bill, as the SOS points out above, but it was enough to send this bill back to the drawing board.
UPDATE 2 (Jim): I should have added the bill is killed for the moment. In fact Fox Allstars just reported the Democrats are planning yet another cloture vote tomorrow to draw attention to Republican opposition. Something will pass but Dodd is going to have to work a little harder with Republicans on this one. The fundamental question here is does the bill end too big to fail or institutionalize it? Republicans say the latter and that argument is slowly winning the day.