[Congressional Record Volume 158, Number 45 (Monday, March 19, 2012)]
[Senate]
[Pages S1764-S1768]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
JOBS ACT
Mr. REED. Mr. President, today I rise to discuss H.R. 3606, the so-
called JOBS Act. As chairman of the Subcommittee on Securities,
Insurance, and Investment of the Senate Banking Committee, I wish all
of my colleagues to know this legislation, as it is currently drafted,
is not ready to become law--and if it does, it could have unintended
consequences that will hurt investors, seniors, and average American
families.
One of the supposed premises behind this legislation is that if we
just deregulate the securities market, then more companies will choose
to issue public stock. The only reason they have been deterred from
going to the public markets, according to this view, is the excessive
regulatory burdens placed upon them.
The Banking Committee has been holding a series of hearings on
different provisions in this legislation, and the reason we have
discovered there have been fewer IPOs does not appear to be connected
to regulatory burdens in any real way, but it appears to be more
connected to economic and geographic factors. That being said, many of
us hear on a daily basis, despite the recent financial crisis, about
how the American regulatory system is making us less competitive,
especially in the context of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
In fact, in testimony before the Senate Banking Committee, Lynn
Turner, a former SEC chief accountant, states that the data says
otherwise. In his words:
The reason IPOs track the economy is that investors invest
to earn a return. When the economy is growing, companies can
grow. . . . However, when the economy has stalled or is
declining, and companies are not growing, investors simply
cannot achieve the types of return they need to justify
making an investment. . . . As a result of the downturns in
the economy that occurred during much of the 1970s brought on
in part by withdrawal from Vietnam, the recession brought on
by inflation at the beginning of the 1980s, the dot com
bubble and the corporate scandals, and the most recent great
recession, investors became concerned about returns that
could be earned in the markets and IPOs declined. As the
economy and employment have recovered after each of these
downturns, so has the IPO market.
Mr. Turner went on to state when he served on a Colorado commission
that was exploring why so many small companies were failing in
Colorado, he said:
[W]e found that access to capital was not the primary cause
of failure. Rather it was lack of sufficient expertise and
management within the company including in such areas as
marketing and operations. While access to sufficient capital
for any company is important, I have found that those
emerging companies with better management teams and proven
products, or products with great growth potential are able to
obtain it. Those are the types of companies VCs and private
equities seek out.
VCs are venture capital companies.
As another securities expert, Professor Mercer Bullard, the Jessie D.
Puckett, Jr. Lecturer and Associate Professor of Law at the University
of Mississippi School of Law, wrote to me in a letter dated March 15 of
this year:
The exemption for emerging growth companies would exempt so
many companies from key investor protection provisions that
the world-leading brand that is the ``U.S. public company''
would be substantially weakened.
So how do we find the balance between facilitating capital formation
while maintaining fair, orderly, and efficient markets and protecting
investors?
As chair of the Subcommittee on Securities, Insurance and Investment,
I want all of my colleagues to know this legislation, as it is
currently drafted, does not have that right balance.
We are getting inundated with letters and phone calls from securities
experts from around the country saying: Please slow down and let this
legislation be improved and amended. On Friday, Commissioner Luis
Aguilar of the Securities and Exchange Commission stated:
It is clear to me that H.R. 3606 in its current form
weakens or eliminated many regulations designed to safeguard
investors. I must voice my concerns because as an SEC
Commissioner, I cannot sit idly by when I see potential
legislation that could harm investors. This bill seems to
impose tremendous costs and potential harm on investors with
little or no corresponding benefit.
The Chairman of the Securities and Exchange Commission, Mary
Schapiro, wrote in a letter dated March 13, 2012:
While I recognize that H.R. 3606 is the product of a
bipartisan effort designed to facilitate capital formation
and includes certain promising approaches, I believe there
are provisions that should be added or modified to improve
investor protections that are worthy of Senate consideration.
In a Banking Committee hearing we held on March 6, 2012, Professor
Jay Ritter, the Cordell Professor of Finance of the University of
Florida, also testified that we should be careful because some of these
bills could actually decrease capital formation and discourage job
growth. He stated:
It is possible that by making it easier to raise money
privately, creating some liquidity without being public,
restricting information that stockholders have access to . .
. restricting the ability of public market shareholders to
constrain managers after investors contribute capital, and
driving out independent research, the net effects of these
bills might be to reduce capital formation and/or the number
of small IPOs.
In a hearing before the Securities, Insurance, and Investment
Subcommittee in December, Professor John Coates, the John F. Cogan
Professor of Law and Economics at Harvard Law School told us some of
the proposals in the House bill actually have the potential to harm job
growth. He stated:
Whether the proposals will in fact increase job growth
depends on how intensively they will lower offer costs, how
extensively new offerings will take advantage of the new
means of raising capital, how much more fraud can be expected
to occur as a result of the changes, how serious the fraud
will be, and how much the reduction in information
verifiability will be as a result of these changes. . . .
Thus, the proposals could not only generate front-page
scandals, but reduce the very thing they are being promoted
to increase: Job growth.
In other words, if these bills don't protect investors enough more
fraud will occur, and it will actually decrease access to capital for
smaller companies.
We have also heard from respected business commentators about the
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shortcomings of the House bill. Steve Pearlstein, the noted business
columnist for the Washington Post, wrote:
What we know from painful experience--from the mortgage and
credit bubble, from Enron, WorldCom and the tech and telecom
boom, from the savings and loan crisis and the junk bond
scandal and generations of penny-stock scandals--is that
financial markets are incapable of self-regulation. In fact,
they are prone to just about every type of market failure
listed in economic textbooks.
Pearlstein points out the characteristics of markets that can lead to
failures. First, there is the prevailing problem of asymmetric
information. Insiders typically know, or should know, a lot about their
company. If key information is withheld, investors are denied critical
information to make informed judgments. The House bill would, under the
guise of ``streamlining,'' undercut necessary disclosures which are
essential to protect investors. He further notes the misalignment of
incentives between promoters of securities and investors. Once the sale
is complete, the promoter typically moves on to other targets.
The investor depends on the performance of the company to validate
the investment, and that usually takes time. Indeed, in many respects,
it is the issue of the short run versus the long run that distinguishes
sound investments from get-rich-quick schemes. The disclosures inherent
in the securities laws have, over 80 years, attempted to strike a
balance--to provide investors with the information to make sound long-
term investments and to thwart the ``fast-buck'' promoters in for a
quick kill. The House bill seriously undermines these disclosures.
The editors of Bloomberg have also weighed in with telling criticism
of the House bill. They point out:
Supporters of the [House] bill point to the falloff in
initial public offerings as evidence that regulatory costs
are dissuading entrepreneurs from creating businesses or
taking them public. And they say rescinding the analyst
research restrictions would benefit small companies, which
Wall Street otherwise ignores. That sounds great in theory,
but the reality offers a different picture. It's true the
number of initial offerings has declined, but evidence
suggests that has less to do with regulation and more to do
with global economic trends.
That is according to the Bloomberg editors.
They go on to point out the conclusions of Professor Jay Ritter, whom
I have already cited. Again according to Bloomberg, Professor Ritter
``has documented, the decline in IPOs is related to declining
profitability of small business. Many are opting to merge with larger
companies to quickly get bigger and more profitable, rather than go
public.''
The Bloomberg editors further point out:
Many of the rules the [House] bill seeks to upend have
helped companies, including the internal controls rule. An
SEC study, for example, found that such audits helped
companies avoid financial restatements, which are costly
exercises that often drive down share prices.
They conclude:
It shouldn't be necessary to gut investor safeguards to
promote job creation. If investors lose confidence because of
worries about fraud, they will demand a higher return on
their money, raising the cost of capital for all.
Floyd Norris, the respected financial writer for the New York Times,
struck similar themes and criticisms in an article last week. He asked:
Do you remember the scandals of the dot-com era? Then Wall
Street firms got business by promising companies that they
would write positive research reports if the company would
only hire them to underwrite an initial public offering of
stock. Companies went public at a feverish pitch, often
rising to amazing heights without much in the way of sales,
let alone profits. Then it all came crashing down.
In the aftermath, the brokers were forced by the Securities
and Exchange Commission, as well as the New York attorney
general, to mend their ways. No longer would analysts be
allowed to go on such IPO sales calls.
Norris goes on:
This bill would end that rule for all but the biggest new
offerings--those that involved companies with sales of over
$1 billion. And it would go much further. As the law stands
now, to keep underwriters from making sales pitches that go
beyond what companies are allowed to say, the underwriters
are prohibited from publishing research on a company while
its initial public offering is under way. This bill would
allow such research, and would say that the company bore no
responsibility for what was said in it. Effectively, there
would be a second prospectus--one largely immune to
securities laws and free to hype the offering by making
forecasts not otherwise allowed.
He goes on:
Why is this needed? Advocates point to the fact that there
are fewer initial public offerings now than there were during
the Internet bubble. That most of those offerings were
horrible investments is conveniently ignored. Nor is any
consideration given to the idea that once-burned investors
might be more wary. The explanation must be excessive and
unreasonably expensive regulation.
Norris went on further to remind his readers of the relentless
ingenuity of promoters trying to circumvent the disclosure laws under
the securities acts. He recalled the recent activities of Chinese
companies to gain access to American investors without full disclosure
through the process of reverse mergers. He pointed out:
Last year, the SEC, worried about a spate of frauds,
required Chinese companies to follow the same rules that
American ones do, with prospectuses made public as soon as
they were filed. Since last summer, there have been no new
Chinese initial public offerings in the United States. That
tightening of regulation would be reversed by this bill.
He went on to quote Paul Gillis, a former auditor for
PricewaterhouseCoopers in China who is now a visiting professor of
accounting at Peking University. Mr. Gillis's words:
If you like those e-mails from Nigerian scammers, wait
until you see the new round about to come from shady Chinese
companies looking for investment--and they will be legal.
In an interview, Mr. Gillis praised section 404, the part of the
Sarbanes-Oxley Act of 2002 that requires companies going public to have
effective internal controls and for auditors to certify them. He said:
When companies list, they hire consultants to help them
design internal control systems to provide integrity in their
reports. These control systems are new to these countries.
They have helped significantly. . . .
The second premise behind this legislation is that access to capital,
whether through crowdfunding, mini-offerings, advertising private
offerings, or more IPOs, will lead to more jobs. In actuality, in this
case it is unclear whether more access to capital will temporarily
create jobs and then destroy them or have a minimal effect. Most of the
experts we have talked to suggest the effects will be minimal. In
effect, it could create a bubble like the ones we have seen with
mortgages, the ones we have seen with dot-coms.
If this legislation remains unbalanced, then it is likely to result
in more unsuccessful investments for investors. Recent history has
shown this will result in investors ultimately pulling out of the
market, reducing business access to capital and costing families and
others money much needed for education and retirement.
Like many of my colleagues on both sides of the aisle, I do believe
there are some innovative proposals in the House bill, and I believe
the amendment I am proposing along with Senator Landrieu and Senator
Levin--the substitute amendment--includes many of these ideas in a way
that better balances market transparency and investor protection with
improving small business's access to capital.
One of these ideas with merit is the creation of a financial
framework that allows entrepreneurs and small businesses to raise
capital through crowdfunding--relatively small investments from many
individuals through online platforms. There is a lot of energy around
this concept of crowdfunding. However, this proposal needs to be done
very carefully. It is critically important to ensure appropriate
regulatory oversight for crowdfunding and make sure there is a strong
balance between investor protection and improving small business's
access to capital.
In our bill, this is the place where we envision the smallest
entrepreneurs could obtain much needed seed capital for their good
ideas.
I recently visited a company in Rhode Island called Betaspring.
Instead of being an incubator for small businesses, Betaspring
considers itself to be a ``boot camp'' for entrepreneurs. Betaspring is
constantly trying to help entrepreneurs to access capital, but
sometimes it is difficult to find enough friends and family who can
help out. But my colleagues, Senators Jeff Merkley, Michael Bennet, and
Scott Brown, have worked long and hard on structuring a bill in this
area, which we have included in the Reed-Landrieu-Levin substitute
amendment. I will let
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them talk to you about this part of our amendment in more detail.
However, I believe their crowdfunding language is a vast improvement
over the House bill, which would permit investors to invest up to the
greater of $10,000 or 10 percent of their annual income without having
to meet any minimum wealth or financial sophistication standards.
Not only are issuers exempt from registration from securities
offerings for up to $2 million in the House bill, it would also exempt
the intermediaries who seek to profit from the operation of
crowdfunding markets.
I think these House provisions are corrected by the approach taken by
my colleagues, Senator Merkley, Senator Brown, and Senator Bennet. I
believe the Senate bill they propose addresses many of the concerns
expressed by Professor John Coffee of the Columbia University School of
Law when he called such crowdfunding provisions the ``Boiler Room
Legalization Act''--a reference to the bad old days when people
gathered in what were called boiler rooms and made cold calls to try to
elicit unwary investors into dubious schemes.
There is another section of our bill which will help small and
medium-sized companies access larger amounts of money--up to $50
million--to infuse their businesses with much needed capital.
We have proposed a few but very important improvements to the work of
Senators Tester and Toomey in their legislation and to similar language
in the House bill.
Let me talk about the improvements to the so-called regulation A or
mini-offering section of the bill to achieve a better balance between
investor protections and access to capital.
Like the House bill, our bill raises the amount of money that can be
raised in a mini-offering process. However, four improvements are made
in the Reed-Landrieu-Levin amendment.
We require that audited financial statements be filed with the mini-
offering statement so that investors truly know what the financial
situation of the company is before they invest.
Let me make a point here. The House proposal would not require
audited financials be filed with the offering documents. I would think
as a basic premise, if you are making an offering for up to $50
million, investors deserve to have financial statements signed off on
by a third party auditor. Our legislation requires it.
We require periodic disclosures of material information to investors.
For example, perhaps the investor of a certain high-tech product the
company is making leaves the company or passes away or something else
happens. Investors deserve to know about that type of information.
We limit the amount that can be raised through the mini-offering
process to $50 million every 3 years. The House bill would allow
investors to raise $50 million every 12 months, potentially allowing
many companies to avoid going fully public and evading more rigorous
public reporting requirements.
Finally, we require a study and report on the new mini-offering
exemption from Securities Act registration. This study is to be
conducted by the SEC, in consultation with the State securities
administrators, and submitted to Congress no later than 5 years after
the date of enactment, so that we consider whether any changes need to
be made to the mini-offering concept created in this legislation.
Although this is still an experiment--to allow general solicitation
and advertising to retail investors for what are bound to be risky
offerings--I believe the protections we have built in will make it a
safer experiment.
We also worked to make some improvements to the initial public
offering or IPO on-ramp section of the bill.
The essence of this proposal in the House is to phase in certain
securities laws and regulations for, in their terms, ``emerging growth
companies'' so they can grow more slowly into becoming a public
company, with all of its benefits and responsibilities.
There are companies that have or will outgrow either the reg D
private placement method of raising capital or the new reg A mini-
offering method of raising capital. But the key issue here is what we
think the definition of an ``emerging growth company'' should be.
The way the House bill is written, it would exempt virtually all new
public companies from nonbinding shareholder votes on say on pay and
executive compensation pay in connection with a merger acquisition; the
relationship between executive compensation and the performance of the
issuer; the requirement under Securities Act section 7 that more than 2
years of audited financial statements be provided for an IPO; and a
requirement that the company's auditor attest to the effectiveness of
the company's financial systems or internal controls under section
404(b).
After discussions with many experts, it is clear that a company with
$1 billion in annual revenue is not what most of them consider to be an
emerging growth company. But that is the level the House has chosen, $1
billion in annual revenues.
In fact, under this definition, the House bill would have exempted
more than 80 percent of current IPOs from registration requirements
which, as I mentioned earlier, are requirements that only recently
appear to be difficult to manage.
As a result, Senators Landrieu, Levin, and I decided this definition
needed to be much more targeted toward smaller IPO companies with less
than $350 million in annual revenue. Even the House bill would have
allowed Enron and WorldCom to be subject to this phase-in, in terms of
reporting and auditing requirements.
In addition to focusing this provision on smaller firms, we also took
out the provisions in the House bill that were eliminating corporate
governance improvement made in the Dodd-Frank bill, such as say on pay
and requirements that the company demonstrate the connection between
executive performance and company performance. We need to give these
provisions more than a year to see how well they are working.
The Reed-Landrieu-Levin amendment also eliminates the provision in
the House bill that interferes with independent accounting standards,
and would have set up two different sets of rules, one for emerging
growth companies and one for other public companies. We agreed with the
Chamber of Commerce that these provisions should be taken out. The
chamber stated in a letter dated February 15, 2012 that:
The opt-out for new accounting and auditing standards would
create a bifurcated financial reporting system with less
certainty and comparability for investors, while creating
increased liability risk for boards of directors, audit
committees and Chief Financial Officers.
We also dramatically narrow the provisions in the House bill that
would have eviscerated the settlement between all of the securities
regulators and 10 Wall Street investment banks regarding the undue
influence of the investment banking unit of a firm on the securities
research unit affiliated with the same brokerage firm.
We learned at a significant cost through the 1980s and the 1990s the
value of independent analysis of markets and securities. Jeff Madrick,
a respected journalist, discussed this issue in his book. In his words:
A measure of this practice was the increase in the number
of buy recommendations. At the end of the 1980s, after a long
run-up in stocks, buy recommendations exceeded sell
recommendations by a large and suspect margin of four to one.
By the early 1990s, buy recommendations exceeded sells by
eight to one. By the late 1990s, only 1 percent of analysts'
recommendations urged an outright sale. The low percentage
remained unchanged even when stock prices were falling and
the investment community was pessimistic.
After the stock market collapsed in the early 2000s, securities
analysts started to admit what was happening inside these firms. Ronald
Glantz, a veteran respected analyst from Paine Webber, testified before
Congress in 2001 as follows:
Now the job of analysts is to bring in investment banking
clients, not provide good investment advice. This began in
the mid-1980s. The prostitution of security analysts was
completed during the high-tech mania of the last few years.
For example, in 1997 a major investment banking firm offered
to triple my pay. They had no interest in the quality of my
recommendations. I was shown a list with 15 names and asked,
``How quickly can you issue buy recommendations on these
potential clients?''
We believe that the wall between a financial institution's research
and brokerage units needs to be maintained.
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Our substitute amendment would allow a research report to be provided
by a firm subject to SEC restrictions, disclosure, and filing
requirements. In particular, the research cannot contain any
recommendation to purchase or sell such security.
In addition, any written communications provided to potential
investors must be filed with the SEC so that they can take a look at
it. These written communications will become part of the issuer's
prospectus, which should give investors some added protections. This
too is a bit of an experiment, given the massive fraud committed on
investors that led to the global research analyst settlement in 2003.
But we have dramatically narrowed the scope of the experiment from the
one in the House version.
Finally, we allow companies to opt out of the emerging growth company
designation and fully comply with all public company regulatory
requirements, which very well may improve the price of their stock,
since investors will have more information regarding the company.
As I said earlier, if these changes in exemptions go too far, some
believe we are doing more harm than good by weakening the value of the
public company brand in the United States and actually harming our
competitiveness in world markets. That is why we have tried to narrow,
appropriately, the proposals in the House legislation.
Next, I want to talk about the most important changes in our bill
from the House bill. The House bill effectively eliminated SEC
prohibitions against soliciting or advertising about private offerings
of securities. Most private placements are offered under SEC rules
known as regulation D. These securities are sold without an IPO or
registration statement being filed with the SEC, usually to a small
number of chosen accredited investors.
In the United States, for an individual to be considered an
accredited investor, he or she must have a net worth of at least $1
million, not including the value of the person's primary residence, or
have made at least $200,000 each year for the last 2 years, or $300,000
together with his or her spouse, if married, and have the expectation
to make the same amount in the current year.
The current net worth and income triggers were adopted 30 years ago.
They have never been changed. The share of U.S. households that met the
test in 1982 was 1.6 percent. It is now at least four times that share.
The largest share of accredited investor households is retirees, many
of whom struggled for decades to save their nest egg.
Because accredited investors are eligible for private placement, they
can be targeted with slick sales pitches without any SEC review or
mandatory disclosure. The House bill removes current prohibitions
against general solicitation or advertising for these private
offerings, which most securities experts believe will have serious
consequences.
Under the current regulatory framework, if the SEC sees unregistered
offerings being advertised, they can immediately close down the issuer,
since they are breaking the law by publicly advertising or soliciting.
Under the House bill, there will be a lot more solicitation of all
investors, perhaps on late-night cable or the Internet, with the only
protection being after the fact under antifraud principles or ex post
inspections of sales records to see if the issuers appropriately sold
only to accredited investors.
SEC Commissioner Aguilar stated in his statement on March 16, 2012,
that this provision may be a ``boon to boiler room operators, Ponzi
schemers, bucket shops, and garden variety fraudsters, by enabling them
to cast a wider net, and make securities enforcement more difficult.''
Realizing in a world of the Internet and Twitter that even private
communications to accredited investors can be broadly disseminated, our
bill takes a much more targeted approach to this issue. In our
amendment, we allow for limited public solicitation and advertising
that is done only in ways and through methods approved by the SEC. We
are sympathetic to the fact that in a world of new media, it is
increasingly difficult for issuers to control their outreach efforts to
accredited investors. We believe our amendment gives the SEC the tools
it needs to formulate a limited exemption to the general solicitation
and advertising rules allowing private offerings to still be private.
None of us wants this legislation to be a boon to boiler room operators
and Ponzi schemers targeting our Nation's retirees or anyone else.
Finally, I want to talk about the shareholder cap issue. What has
become clear to me as a result of the capital formation hearings in the
Banking Committee is that this issue of the appropriate number of
shareholders to trigger routine reporting through the SEC is something
that requires very careful consideration. The present 500 recordholder
threshold was originally introduced to address complaints of fraudulent
activity in the over-the-counter market for securities.
Since firms with fewer than the threshold number of investors were
not required to routinely disclose their financial information, outside
buyers were not able to make fully informed decisions regarding their
investments. The exchange act mandates that investors in over-the-
counter securities be provided with equivalent information to that
provided to investors trading stocks on the major exchanges if the
company has 500 holders of record and at least $10 million in assets.
Many believe this threshold needs to be updated. But the House bill
dramatically increased the threshold from 500 to 2,000. Others believe
raising this threshold to 2,000 would impair capital allocation and
market efficiency, reducing public information about widely traded
companies and denying investors appropriate information about
companies.
First, we believe the House bill risks allowing large companies with
less than 2,000 recordholders--and listen to some of these companies:
Hyatt, Hertz, Chiquita Brands, Adobe Systems, HCA Holdings--Hospital
Corporation of America--Kaiser Aluminum, Royal Caribbean Cruises,
Towers Watson, Ralph Lauren, and Accenture--and these are just some of
them--to delist and go dark without disclosure or regulatory oversight.
I think that would frustrate the expectations of many of their
investors.
As a result, we decided to take a more prudent approach in our
amendment and raise the level from 500 to 750. At the same time, we
believe the holder of record actually needs to be the beneficial owner
of the security. This means he or she has power to vote the share or
dispose of the share. Through our hearings on this matter, it is clear
that many big firms are getting around this requirement by pooling
shares in a street name, such as an investment company like JP Morgan.
These big firms have many thousands or hundreds of beneficial owners
that can sell and dispose of their shares and have the right to the
dividends. But on the books of the company, it is just one
recordholder. Our amendment eliminates this work-around and requires
the holder of record to actually be the beneficial owner.
We are also sympathetic to the fact that many more companies are
starting to give their employees stock as part of their compensation
plan. We are sympathetic to their desire not to have this prematurely
trigger the Securities Exchange Act. Companies such as WaWa and Wegmans
testified before the Banking Committee that they want to give their
employees shares without forcing their company to have to go public. As
a result, our amendment exempts employees for the recordholder account,
which should allow firms to give as many shares as they want to their
employees without forcing them to go public before they are ready.
We think our provision achieves a better balance between market
transparency through disclosures and investor protections and the needs
of some of our most successful family-owned or privately held firms to
reward their employees and maintain their private status.
As we debate H.R. 3606, which could dramatically weaken the world
leading brand that is the American public company, we should realize
that we are undertaking a dramatic and perhaps unfounded experiment. We
should also understand that deregulating our securities markets may
have no effect whatsoever on the number of IPOs.
Companies are desperate for funding since we just went through the
biggest financial crisis since the Depression
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and lending is down. Deregulating our capital markets could temporarily
infuse our markets with more cash, but at what cost? The cost could be
quite great. As Jessie Eisinger stated in his ProPublica column on
March 14:
It's been about a year now since Chinese reverse-merger
companies collapsed. In that scandal, dozens of those small
Chinese companies went public in the United States without
having to run the gauntlet of the Securities and Exchange
Commission's registration rules. After they blew up by the
boatload, the SEC cracked down and tightened its rules. Since
then, short-sellers' pickings have been slim. By allowing new
public small companies to not disclose financial information
for years, the bill will provide new targets for short-
selling hedge funds.
Like Mr. Eisinger, I believe the House bill as currently drafted
basically makes markets less transparent and more subject to
manipulation. What the House bill clearly does not do is address the
needs that I hear about from employers in my State.
The economy consists of a lot of moving pieces. Economic recovery on
its own will do more to reverse the decline in business activity than
any provision in the House bill. Moreover, the House bill doesn't
include provisions that I am hearing from Rhode Island employers would
actually be helpful to creating jobs, such as Small Business
Administration loans and export assistance. As a result, our amendment
actually includes a number of already tried and true, tested job-
creating measures. It is estimated, for example, that by reauthorizing
the Export-Import Bank, our amendment would support an estimated
288,000 American jobs at more than 3,600 U.S. companies in more than
2,000 communities.
Other provisions in our amendment would expand the Small Business
Investment Company Program, supporting more small business startups in
communities across the United States.
Finally, we continue a modification to the Small Business
Administration 504 Loan Program to allow for the refinancing for short-
term commercial real estate debt. This provision has proved essential
for many small businesses with short-term debt. As we have been looking
at the House bill more closely, I think we have all been learning that
it is not doing what it was advertised as doing, which is creating more
jobs. We need to slow down and go through an appropriate amendment
process in the Senate.
As Barbara Roper, director of investor protection for the Consumer
Federation of America, recently stated in a March 11, 2012, San
Francisco Chronicle article, the House bill as currently drafted is
``completely bipolar.'' On one hand, we are trying to make it easier
and less expensive for companies to go public. On the other hand, by
increasing the shareholder threshold in the legislation, the House is
actually encouraging and letting companies stay private or go private
and avoid an IPO.
I urge all my colleagues on both sides of the aisle to take up the
Reed-Landrieu-Levin amendment as the base text of the legislation and
engage in both a robust debate and amendment process. Our securities
markets deserve just as much attention as our Nation's transportation
system, and we spent several weeks dealing with the Transportation bill
on the Senate floor. The Reed-Landrieu-Levin amendment is a much better
place to start this debate on how to improve access to capital in our
securities markets without opening them up to unnecessary fraud and
manipulation.
With that, I yield the floor and suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. JOHNSON of Wisconsin. Mr. President, I ask unanimous consent that
the order for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Manchin). Without objection, it is so
ordered.
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