STOCK MARKET WATCH - Monday, 12 March 2012

[Demeter]

34. They Have Very Short Memories NYT EDITORIAL

http://www.nytimes.com/2012/03/11/opinion/sunday/washington-has-a-very-short-memory.html?_r=1

House Republicans, Senate Democrats and President Obama have found something they can all support: a terrible package of bills that would undo essential investor protections, reduce market transparency and distort the efficient allocation of capital...Of course, supporters don’t describe it that way. They say the JOBS Act — for Jumpstart our Business Startups — would remove burdensome regulations that they claim have made it too difficult for companies to raise money from investors, impeding their ability to grow and hire.

Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness. Unfortunately, election-year politics and powerful constituencies — rather than research and reason — are driving the JOBS legislation forward. It passed the House on Thursday, after the Obama administration endorsed it; the Senate leadership is expected to introduce a similar package this week.

Republicans love it because deregulation is at the core of their corporate-centered agenda. President Obama wants to burnish his pro-business credentials. Most Senate Democrats, keenly aware of big business’s deep campaign contribution pockets, are eager to go along. The centerpiece of the bill would curb investor protections in the Sarbanes-Oxley law that require companies to meet specific disclosure, accounting and auditing standards before going public. The legislation is promoted as applying only to small companies, but the parameters would encompass all but the nation’s biggest new companies. It would also let new public companies delay compliance with provisions of the Dodd-Frank law on executive compensation and shareholder “say on pay.” Another provision would permit “crowd funding” — raising money from small investors through the Internet — without requiring those companies to provide meaningful disclosure and without adequate oversight by the Securities and Exchange Commission. John Coffee Jr., a securities law expert, has dubbed that the “Boiler Room Legalization Act.” Yet another provision, opposed by AARP and state regulators, would allow private companies to solicit investors, a move that could expose unsophisticated investors to offerings that they cannot properly evaluate.

Dozens of legal experts and advocates for investors and consumers have written to Senate leaders warning that extensive revisions must be made to the House legislation for it to be even minimally acceptable.

We know memories are short in Washington. But Enron was just 10 years ago. And the entire system almost imploded in 2008. There is no excuse.