[Congressional Record Volume 158, Number 46 (Tuesday, March 20, 2012)]
[Senate]
[Pages S1824-S1831]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  JUMPSTART OUR BUSINESS STARTUPS ACT

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of H.R. 3606, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (HR. 3606) to increase American job creation and 
     economic growth by improving access to public capital markets 
     for emerging growth companies.

  Pending:

       Reid (for Reed) amendment No. 1833, in the nature of a 
     substitute.
       Reid amendment No. 1834 (to amendment No. 1833), to change 
     the enactment date.
       Reid amendment No. 1835 (to amendment No. 1834), of a 
     perfecting nature.
       Reid (for Cantwell) amendment No. 1836 (to the language 
     proposed to be stricken by amendment No. 1833), to 
     reauthorize the Export-Import Bank of the United States.
       Reid amendment No. 1837 (to amendment No. 1836), to change 
     the enactment date.
       Reid motion to recommit the bill to the Committee on 
     Banking, Housing, and Urban Affairs, with instructions, Reid 
     amendment No. 1838, to change the enactment date.
       Reid amendment No. 1839 (to (the instructions) amendment 
     No. 1838), of a perfecting nature.
       Reid amendment No. 1840 (to amendment No. 1839), of a 
     perfecting nature.

  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, I come to the floor to express my strong 
disappointment with the so-called small business legislation passed by 
the House of Representatives which is now coming before the Senate this 
afternoon for a cloture vote and to express my support for the 
substitute amendment offered by Senators Reed of

[[Page S1825]]

Rhode Island, Levin, Landrieu, and others, of which I am a cosponsor.
  Quite simply, there is a right way and a wrong way to address some of 
the legitimate concerns about the ability of small businesses to access 
capital. Unfortunately, the House bill is completely the wrong 
approach. In the name of helping small business, the bill takes a meat 
ax to the very investor protection laws that have allowed our capital 
markets to flourish.
  On Sunday, March 11, the New York Times published an editorial about 
the House bill titled ``They Have Very Short Memories.'' This title 
could not be any more appropriate because in the wake of the dot-com 
bubble, the Enron corporate accounting scandal, and the 2008 financial 
crisis, advocates of this bill must have very short memories indeed.
  The idea that this is the right time to further weaken regulations on 
Wall Street is simply unconscionable. As we are continuing to dig out 
of the worst financial crisis since the Great Depression, which has 
brought so much pain to hard-working middle-class families, the idea 
that the solution to what ails our economy is to further deregulate the 
financial sector and to open the door for fraud and abuse simply makes 
no sense.
  According to a recent report from the Center on Retirement Security 
at Boston College, financial scams against seniors enabled by the 
Internet are already on the rise. For this reason, AARP wrote that 
their ``primary concern is that these bills . . . inadequately protect 
against the potential harmful impact on investor protections and market 
integrity.''
  Even more, the North American Securities Administrators Association--
this is the organization of State securities regulators--said of the 
House-passed bill:

       By placing unnecessary limits on the ability of State 
     security regulators to protect retail investors from the 
     risks associated with smaller, speculative investments, 
     Congress is poised to enact policies intended to strengthen 
     the economy that will likely have precisely the opposite 
     effect.

  ``Precisely the opposite effect''--that is from the North American 
Securities Administrators Association. Who are we listening to around 
here anyway?
  Supporting that view, the AFL CIO wrote to Congress that ``while the 
proponents of the 'capital formation' bills claimed they would promote 
jobs . . . they would actually have the perverse effect of raising the 
cost of capital for all companies by increasing the risk of fraud.''

  Passing the House bill would be a terrible mistake. I remember well 
the last time we rushed to deregulate the financial sector in the name 
of creating jobs. I was here in the Senate then. It was in the late 
1990s when we passed a bill to repeal the Glass-Steagall Act that was 
enacted during the Great Depression.
  What happened was Glass-Steagall said: If you are an investment bank, 
you can be an investment bank. If you are a commercial bank, you are a 
commercial bank. If you are an insurance company, you are an insurance 
company. But if you are an investment bank, you can't sell insurance. 
If you are an insurance company, you can't be an investment bank and 
you can't be in commercial banking.
  That worked well for over half a century in our country. During the 
boom years of the 1950s, the 1960s, the 1970s, into the 1980s, this 
worked well for our country. All of a sudden, Wall Street got together 
and said: Wouldn't it be great if we could break down these walls and 
put this all together? And they came to Congress in the 1990s and put 
together a bill to get rid of this Glass-Steagall protection.
  Then what happened? These huge financial companies, such as Citigroup 
and AIG, sort of sprung up because now they have insurance--AIG--AIG 
now becomes a commercial bank and it becomes an investment bank. They 
get larger and larger, and they get reckless. They take irresponsible 
risks because while they might have known about insurance, they didn't 
really know about investment banking. Investment banking may have known 
about investment banking, but they didn't know a heck of lot about 
insurance or commercial banking. So we got into this huge irresponsible 
financial structure, and it plunged the global economy into the worst 
financial crisis in generations.
  I am proud of the fact that I was one of only eight Senators to vote 
against the deregulation of Glass-Steagall. I tell you, this bill 
reminds me so much of that. It was ``follow the crowd.'' Everybody was 
for it. President Clinton was for it. Secretary Rubin was for 
deregulating Glass-Steagall. Larry Summers--I don't know whether he was 
with the national Council of Economic Advisers at that time--was for 
it. Republicans were for it. And it just went through here like greased 
lightning. Wall Street was for it. Glass-Steagall was old, don't you 
see. That was old stuff back from the Depression. We needed something 
new, a new regime out there. As I said, I was one of eight who voted 
against it, and I spoke against it here on the floor at the time. I 
said: We are going to regret this. And, boy, did we ever learn to 
regret what we did in deregulating Glass-Steagall.
  I bring this up because Simon Johnson, the former Chief Economist at 
the International Monetary Fund, the IMF, recently wrote:

       With the so-called jobs bill, Congress is about to make the 
     same kind of mistake again as in the repeal of the Glass-
     Steagall Act.

  I urge my colleagues to take these words seriously. Unless we do this 
in the right way, future Members of the Senate will be standing right 
here lamenting the fact of what we did in a hurry to follow the crowd.
  Fortunately, there is an alternative way to make the reforms that are 
necessary to allow small businesses to grow without jeopardizing our 
financial markets and hurting consumers.
  SEC Chairwoman Mary Schapiro wrote in a March 13 letter to Senators 
Johnson and Shelby:

       I believe there are provisions that should be added or 
     modified to improve investor protections that are worthy of 
     the Senate's consideration.

  The substitute amendment offered by Senators Reed, Levin, and 
Landrieu includes these important reform provisions. Let me list a few 
of the things the substitute amendment would do.
  First, the House bill would allow companies to advertise risky, less 
regulated, unregistered private offerings to the general public using 
billboards along the highway, cold calls to senior living centers, or 
other mass-marketing methods.
  Do you know what this means? Let's say an elderly person is living in 
a senior living center or maybe going there for recreation. All of a 
sudden they are in a room and a lecture is given to them about how they 
can take their 401(k) money--maybe they have $100,000--you can take 
some of your 401(k) and put it into this small startup, and, guess 
what, it is going to be like the beginning of Apple Computers or it is 
going to be the beginning of Microsoft. This is a small company. If you 
just invested a few hundred dollars, why, you can quadruple your money, 
probably, in 4 or 5 years.
  That is what they can do under the House bill. They can come in with 
cold calls--anything. The Reed-Landrieu-Levin amendment would allow 
firms to advertise only to investors with appropriate resources and 
sophistication to bear the risks.
  The House bill would tear down protections put in place after the 
late-1990s Internet stock bubble burst that prevented conflicts of 
interest from tainting the quality of the research about companies. We 
know researchers were involved with the investment bankers doing the 
initial public offering. They were given all this stuff about how great 
this was and how much money it was going to make in a short period of 
time.
  What we need is a firewall to keep the investment bankers separate 
from the researchers. That is what Reed-Landrieu-Levin would do, so 
there is no conflict of interest there.
  The House bill would allow very large companies with up to $1 billion 
in revenues to offer stock to the public, yet avoid financial 
transparency and auditing requirements designed to ensure they are not 
cooking the books.
  The Reed-Landrieu-Levin amendment would ensure that essential 
investor protections apply to large companies by lowering the 
exemptions to companies with less than $350 million in revenues. That 
number actually came from the SEC, as sort of a reasonable amount--not 
$1 billion. That would allow huge companies to not

[[Page S1826]]

have to have the auditing requirements, for example, that the SEC 
requires, or the financial transparency. Think about preying on the 
public with that. We are a big company. We have up to $1 billion in 
revenues. You don't have to worry about this. You can invest your money 
here, and don't worry about auditing and stuff like that, we take care 
of it ourselves. If we were doing bad things, we would not be so big, 
right? How many times have we heard that before?
  The House bill will allow unregulated Web sites to peddle stocks to 
ordinary investors without any meaningful oversight or liability, which 
could give rise to fraud, money laundering, and other risks. That is 
what is called crowdfunding.
  We keep hearing this word ``crowdfunding.'' Whenever I hear that 
word, I get a little nervous. Whenever the crowd is moving in one 
direction, you want to ask questions: What is moving the crowd? Why is 
the crowd moving in that direction? Crowdfunding? The Reed-Landrieu-
Levin amendment would protect the integrity of these markets by 
ensuring that the Web site intermediaries are subject to appropriate 
levels of oversight. Think about this: Unregulated Web sites can peddle 
stocks to ordinary investors without any oversight or liability. The 
House bill would allow extremely large companies with tens of thousands 
of shareholders to evade the Securities and Exchange Commission 
oversight. Let me repeat that. The House bill would allow extremely 
large companies with tens of thousands of shareholders to evade SEC 
oversight. The Reed-Landrieu-Levin amendment would ensure that banks 
and other large companies with lots of shareholders are subject to the 
basic transparency, integrity, and accountability protections.

  Right now, under SEC law, if you have over 500 shareholders, you have 
to go public. And when you go public, you have to be subject to 
accounting principles, oversight, and transparency by the SEC. The bill 
raises that to 2,000 shareholders. Yet they can go out there and--I 
don't know what Facebook has right now, but I don't think they have 
2,000 shareholders; maybe, but I don't know. Let's say they have 1,000 
or 1,200 shareholders. They can get by without having any real SEC 
oversight as long as they have less than 2,000 shareholders. Should 
that be allowed in this economy with all that we know, with what has 
gone on in the recent past?
  In sum, the substitute amendment is vastly better than the House-
passed legislation. It protects investors, it protects consumers, it 
protects our capital markets that allow small businesses to grow. So 
let's heed the lesson of the last decade; let's take a step back; let's 
pause before rushing to deregulate our economy and Wall Street even 
further. Previous acts of Congress to deregulate our markets in the 
hope of spurring economic growth may have helped Wall Street, and a lot 
of people in the last 10 years made a lot of money on Wall Street. You 
know what. They still have their money. They have taken that money and 
they bought other things, and now they are sitting pretty. Yet 
homeowners and average ordinary Americans have lost their shirts in 
this economy in the last 10 years. But the people who engineered these 
new devices, these new kinds of derivatives, who worked to do away with 
Glass-Steagall, made a lot of money on Wall Street.
  I can tell you that if the bill passes without the Reed-Landrieu-
Levin amendment, you are going to see a new flourish of activity on 
Wall Street. A lot of Wall Street bankers and a lot of people will make 
a lot more money. And you know what. A few years from now we are going 
to hear all kinds of stories about elderly people or people about to 
retire who have 401(k)s who got sucked into investing someplace without 
any real knowledge of what the business was, not to mention other 
people who maybe went on their Web site and were lured into investing a 
few dollars--$100, $200, $500. You say, well, they lost it. They didn't 
lose much. But if you add that up, it is thousands and thousands of 
Americans. It may be a small loss to each individual person, but the 
money gained by this so-called startup company--that may go under in a 
year or less--the people who started the company walk away with the 
money. We are going to be hearing stories about that in the next 5 to 
10 years if this bill passes.
  Again, Wall Street made out like bandits in the last 10 years, but 
for the rest of America it was the worst economic crisis in 
generations.
  I close by saying the Senate should not follow the crowd. The House 
rushed this through without any real due diligence, but isn't the 
purpose of the Senate to cool and slow it down? Let's take a close look 
at it.
  I urge my colleagues to oppose the House measure and support the 
substitute amendment when it comes to the floor later today for a vote. 
Let's not repeat the mistakes of the past.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Tester). The Senator from Louisiana.
  Ms. LANDRIEU. Mr. President, let me begin by thanking Senator Harkin 
for his excellent statement and, as usual, his very good judgment on an 
issue that the Senate is going to be voting on at 4 p.m. and 5 p.m. 
today as opposed to 20 minutes from now, because this issue needs more 
debate, and the Senator from Iowa raised some very important questions 
that need to be answered. I want to start by thanking the Senator for 
raising the issues that are so important for us as we consider this 
House bill that was--in your words, and I will add--rushed over to the 
Senate.
  I spoke to Barney Frank yesterday, a very respected Democratic 
Member, and he assured me we were actually doing the right thing by 
slowing this down.
  Mr. HARKIN. I thank my colleague from Louisiana for her leadership on 
this issue. We are all busy around here. We have our issues that we 
look at. I have other issues in my committee that I am so focused on 
now that I had not really paid attention to this until the Senator from 
Louisiana brought it up last week, and then I began to ask myself: What 
is this all about? The more I looked into it, the more devastating I 
found this piece of legislation that came from the House.
  I thank the Senator from Louisiana for having the foresight, courage, 
and determination to make sure we are all aware of what this 
legislation does. And, quite frankly, I commend the Senator from 
Louisiana for slowing this down. Since last week, I have talked to 
other Senators who had not really focused on it either. We have other 
responsibilities and duties, but the Chair of the Small Business 
Committee focused on this, and I thank the Chair for her great 
leadership on this issue. I hope we can adopt the substitute amendment 
to this bill later today.
  Ms. LANDRIEU. Through the Chair, I thank the Senator from Iowa.
  I also recognize the Senator from Oregon, who is on the floor, who 
has had such an impact on helping us to focus on the details of this 
bill that was rammed through the House and was on a fast track to get 
approved over here. As I have said many times, I am not opposed to the 
underlying concepts of this bill, which will broaden the opportunity 
for average people to have some excellent opportunities for investments 
to help them increase wealth. We on our side of the aisle are not 
opposed to increasing wealth. We want to make sure that basic investor 
protections are in the bill, and they are absent from the House bill.
  We are not talking about mom-and-pop operations when you are talking 
about companies with revenues of $1 billion. The Senator from Iowa is 
well aware, as is the Senator from Oregon, of mom-and-pop operations. 
We have them in our States. We have mom-and-pop farmers, office supply 
companies, shoe repair companies, even substantial businesses. There 
are families who own three and four and five restaurants. We are very 
familiar with that. But under no circumstance would those companies 
meet the $1 billion in sales, so we are not talking about small 
business. That is why, as the Chair of Small Business, I am here to say 
there is nothing small about this bill. This is about big business 
getting out from underneath regulations that we spent decades trying to 
put into place for good reason.

  Did we not just have a financial meltdown on Wall Street? Did I miss 
a chapter in this saga? Didn't we just pull ourselves up from the brink 
of international financial collapse started not by Korea, not by Japan, 
not by

[[Page S1827]]

China, but by the United States of America with our inability to 
properly regulate our financial system? Didn't we just almost bring the 
world economy to a halt? Did I miss this? So this little innocuous bill 
flies over here from the House with a fancy name talking about jobs, 
and because we are all desperate to create more jobs--we understand our 
people need more jobs. We understand that government has a role in 
creating jobs, of course, with the private sector. We know that the 
policies we drive here, whether it is tax policy or regulatory policy 
or whether we say this is legal and this isn't, have a real impact on 
job creation. We look at the title of the bill, it says jobs, and we 
cannot wait to vote for it. But if we are not careful and we pass the 
House bill on this subject without an amendment, it will not create 
jobs, it will kill jobs.
  As the Chair of the Small Business Committee, I have to say I don't 
think any Member has stood on this floor longer or spoken more directly 
to the issue of getting capital into the hands of business than I have. 
So I hope I have developed, on both sides of the aisle, some 
credibility to say: Yes, we want to open capital opportunities to 
business, but we must have investor protections. If not, we will set 
ourselves backward several decades as opposed to forward, and that is 
not what we want to do.
  I rise to urge Members to consider voting for the substitute that 
Senator Reed, the ranking member on banking, Senator Levin, the 
chairman of the investigative committee who has done extraordinary work 
rooting out fraud and corruption, a long-serving, well-respected member 
of this caucus--obviously the senior Senator from Michigan is more 
concerned about jobs than any of us. He has lost more jobs--well, 
probably per capita except potentially for the State of California. So 
why would he be joining us in opposing a jobs bill? Because he knows 
what I know, what Senator Reed knows, what Senator Merkley knows, what 
Senator Harkin knows--and those who have taken the time to review the 
bill--that on its surface it looks good, but even the Chair of the SEC 
has cautioned us not to vote for the bill as it stands, and also says 
it can be fixed. It can be amended, but we need to oppose cloture so we 
don't end the debate but we begin the debate and then get to a position 
which the leadership can most certainly get us to where appropriate 
amendments could be offered.
  I am saying: Please don't let the word ``jobs'' in the House bill--
which sounds so enticing--fool you. In reality this is less about job 
creation than it is about rolling back key protections for investors. 
Unfortunately, I have to say that I think there is a little election 
year politics at play from both the White House's perspective and the 
Republican caucus that saw this as a good way to position themselves 
for the election.
  Look, I have been guilty of doing that myself. Nobody is perfect 
around here, but there is a time when you do something like that that 
it is called to your attention and you say: I am sorry, I shouldn't 
have done it, and this is the right way to go. And that is what we need 
to do now.
  As Sir Francis Bacon said over 400 years ago: Knowledge is power. The 
more knowledge we have about this bill will give us the power to 
advocate against it.
  I am here again to tell my colleagues the more you will learn about 
this runaway freight train, the more red flags are being waved. Red 
flags are waving because of the unintended consequences of the House 
bill for investors, small businesses, and our economy in general. That 
is why Senator Jack Reed, Senator Carl Levin, Senator Merkley, and 
others have been down here now for days encouraging Senators to review 
the bill, go back and talk with your staff. Please allow us some time 
to make some serious changes.
  Now, even if my colleagues can't believe me on these issues, I most 
certainly hope my colleagues can believe the Bloomberg report. The 
Bloomberg report comments that have been made--Bloomberg is a very 
widely read, very reputable wire service and newspaper now, and, of 
course, they have other interests as well that comment daily on the 
financial markets of the world. It is one of the most respected 
sources. They have basically editorialized against the House bill.
  Why would they do that? Let me read my colleagues what the Bloomberg 
editorial said a few days ago. They said:

       [T]he JOBS Act simply goes too far. It would gut many of 
     the investor protections established just a decade ago in 
     Sarbanes-Oxley. A wave of accounting scandals--think Enron 
     and WorldCom--have destroyed the nest eggs of millions of 
     Americans and upended investor confidence in Wall Street. The 
     relief would extend beyond small businesses and apply to more 
     than 90 percent of companies that go public.

  At a time when we are trying to build investor confidence, to build 
our economy, and to create jobs, we are about ready to exempt 90 
percent of the companies that are going public from full disclosure? I 
am the sponsor of the amendment that tried to exempt small companies 
from these regulations--companies of $50 million or $100 million in 
sales. That would cover every mom and pop known to man. But the House 
bill exempts companies up to $1 billion in revenues from full public 
disclosure. Is this what we want to do at a time when we are just 
regaining investor confidence? I don't think so.
  Bloomberg says to put on the brakes:

       At the center of the package is a new class of emerging 
     growth companies, defined as those with as much as $1 billion 
     in annual revenue, which would be exempt from a host of 
     disclosure, reporting and governance rules. These companies 
     would be able to operate up to 5 years without an independent 
     test of their internal controls--the checks and balances that 
     help companies prevent outright fraud and costly accounting 
     mistakes.

  It goes on to say:

       Emerging companies would also be able to promote public 
     offerings with less-than-complete information by ``testing 
     the waters'' with fancy PowerPoint slides and other pre-IPO 
     materials. Executives wouldn't be held accountable for any 
     misrepresentations.

  I say to my colleagues, what are we thinking? We are not. We have to 
put on our thinking caps. Let's amend this House bill.
  The bill from the House did not even go through our Banking 
Committee. Had the bill gone through the Banking Committee, had it been 
under the watchful eye of some of our Democrats and Republicans on the 
Banking Committee, and had the bill come out of the Banking Committee 
with a Democratic and Republican vote--or even with the majority of 
Republicans and one or two or three Democrats--this Senator would not 
be standing here because this is not my jurisdiction. I am not on the 
Banking Committee. I am the chair of the Small Business Committee. I 
would honor the work of the Banking Committee, and I would have simply 
said I don't necessarily agree with the bill; I will just vote no. But 
the bill didn't even go through the Banking Committee. It just flew 
right here to the Senate floor because somebody wants a bumper sticker 
for their next campaign.
  AARP doesn't think the bumper sticker is a good one because they have 
come out against it because many of the people who got their bank 
accounts down to zero were the elderly, the people who can least afford 
this kind of scam and fraud on Wall Street, let alone on Main Street. 
They are the ones who saw their 401(k)s go down from $300,000, which 
took them their whole lives to save, to $50,000. How do we think they 
feel? That is why AARP has come out against the House bill.
  I am sure there are some people saying this is just Democrats wanting 
to regulate everything and not allow capitalism to thrive. Nothing 
could be further from the truth. I have spent my whole time trying to 
create jobs and opportunity for small businesses in America that 
represent 27 million businesses, and 20 million of them are independent 
operators and 7 million are classified as small businesses below 500 
employees. I know them pretty well. I have worked with them very 
closely. Many of them are Main Street alliances against this bill, 
small business alliances, and the chamber of commerce has even 
expressed some concern about the House bill.
  We are creating jobs. This is what the President inherited: a 
freefall of job loss in this Nation. This is what he inherited when he 
became President in the early part of 2009. He was elected in 2008, but 
he didn't take office until January 2009. He walked to the captain's 
chair and sat down after the ship had hit the iceberg, not before. He 
has

[[Page S1828]]

battled with us mightily to move these numbers to where we can see jobs 
being created. The last thing we need to do is to stop this, and the 
House bill, without investor protections, absolutely has the 
possibility of doing just that.
  Time and time again, I have stood right here on the Senate floor 
fighting with my colleagues to increase access to capital for America's 
job creators. I support adding capital and directing it or helping it 
to be directed to better places, to make the process more democratic.
  I understand the system has been basically set up for those who go to 
the high and mighty Ivy League schools, who join the same clubs, whose 
families socialize together for years and years. I understand the rules 
have been written for that group. I would like to write them for 
everyone, and I am attempting to do that. But we have to write and 
expand those rules with the right protections, and they are not present 
in the House bill.
  I am a Democrat who used to love what President Clinton would say: 
Our job is to create more millionaires in America, not less. I am proud 
of the book ``The Millionaire Next Door,'' which says most millionaires 
in America aren't people who inherited their money but people who 
worked hard for it because of our system. I am proud of that. I have 
spent my life helping to build it. I am for people getting rich, for 
people making money. But we have to write these rules fairly or it is 
the poor people, it is the middle class, it is the people who didn't go 
to the Ivy League schools who don't have the right insider information 
who are going to be led down the Primrose path.
  So let's be careful. Let's not support the House bill as it has come 
over here. We scrambled--and I mean the word ``scrambled''--last week 
to try to put a substitute together, and that substitute has my name on 
it. It has Senator Jack Reed first, my name second, Senator Levin 
third, and a group of others who have joined us.
  Our substitute is not perfect either. I hope our substitute can get 
60 votes and that we can amend a few things the SEC has brought to our 
attention since we were kind of on a tight timeframe to get something 
to the leadership. I would rather be more careful with the work I 
submit to the Senate, but we were under a tight timeframe, and even our 
bill has to be amended.
  I am asking my colleagues, if they can't vote for our bill, which is 
the substitute bill, then please do not provide cloture to the House 
bill either. Let's take a few days. We are not asking for weeks. I am 
not even trying to kill the House bill. I am simply trying to amend it 
so it works for people who can't go to Harvard and can't go to Stanford 
and can't go to some of these Ivy League schools; that it works for 
people who are going to some community colleges and to schools in their 
States, middle-class families who want to participate in the great 
American dream and would like to invest in these new rules and 
regulations on the Internet, to invest in companies that have 
potential. But, please, let's give them, the investor, protections they 
deserve.
  One more thing and I will turn it over to the Senator from Oregon. I 
wish to say this to the community bankers: You may have some others who 
support you on this floor, but I don't think you have anybody who does 
as strongly as I support community bankers. There is a provision in 
this bill that expands your shareholders from the cap of 500 
shareholders that was put there in 1960. In our bill, the substitute, 
we move it up to 750 shareholders. I am willing to go back up to the 
House number of 2,000 because banks are regulated. They are 
overregulated community banks, in my view. So I am willing to extend 
that to 2,000 shareholders.
  Barney Frank agrees with that. I have talked to Senate Democrats, and 
they agree with that. Please don't put your political might in 
supporting the House bill just because you have your number in there 
that you want because you will, in my view, undermine investor 
confidence in this new way we are trying to help people, called 
crowdfunding on the Internet. We will take care of your issue. I have 
it in my sights. I know it is important to you, and if you give us time 
we can try to fix that.
  I thank the Senator from Oregon for joining me. He is truly an expert 
on this particular subject, and he can add some more detail to what I 
have tried to explain, and we will be happy to answer any questions our 
colleagues have about this underlying issue which is so important.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. MERKLEY. Mr. President, I rise today to ask my colleagues to give 
serious consideration to a major piece of legislation that is a 
crowdfunding amendment introduced by Senator Bennet and myself and has 
the support of Senator Landrieu, Senator Brown, and a number of others. 
I thank Senator Landrieu for the points she has been making and for her 
fierce advocacy for creating a highway for Americans to build wealth 
without creating avenues that essentially send people into either blind 
alleys or over a cliff.
  That is what this conversation is all about today. We want to enable 
aspiring entrepreneurs to access capital and to do so in ways that 
allow new opportunities to create, but to make sure investors have the 
information they need to make reasonable choices.
  The amendment I am introducing specifically is a crowdfunding 
amendment. My colleagues have probably heard this term a number of 
times. It enables aspiring entrepreneurs to access investment capital 
via the Internet from small dollar investors across America. This is 
very exciting stuff. We have seen some similar Internet models. One 
model, for example, enables individuals across America to look at 
projects--projects for art and civics, projects across the country--and 
say: Yes, I want to make a small dollar investment--which is truly, in 
this case, a donation--to that social project, to that art project. 
Such a site is kickstarter.com. So on the site is a list of projects, 
and then people can go in and decide what they want to support to help 
make it happen. Whereas in the past, someone who wanted to do a 
documentary film might have had to seek out some substantial dollars, 
some large dollar funders, now they can go to kickstarter.com, present 
their project, and possibly raise the capital they need from thousands 
of small dollar donors.
  For instance, in 2010, a filmmaker raised $345,000 to make a 
documentary about jazz from a pool of 3,000 donors, most of whom 
donated $100 or less. We also have peer-to-peer lending on the Internet 
where folks can say this is what they would like to borrow money for, 
and people can get on and say, yes, they will lend that money.
  But what we do not have is a process in which companies can list 
themselves on the Internet and say: Do you want to invest in my 
company? Here is my dream. I am going to make a better coffee shop. I 
am going to make a small wedding cake company. Do you want to invest in 
my vision, in my dream? Here are the details.
  Folks can get on and join and help create that startup capital or 
create the capital for a small business to expand.
  So that is what crowdfunding is. It is parallel to these other 
efforts. What we have in the House bill is basically a provision which 
says: No rules. Do whatever you want.
  Now, unfortunately, that does not work. It does not work because if 
we do not require the company to give information about their company, 
if we do not provide rules that require accountability for the accuracy 
of that information, then what we are simply doing is saying here is a 
Web site where predators can put up a fictitious story about what they 
want to do, make it as exciting as possible, and run away with people's 
money--no consequences; pay themselves a salary, dump out the money. 
The House bill requires no information. If folks do put up information, 
it does not require that information to be accurate. It legalizes 
predatory scams. It says people can list and close in a single day.
  So for those who say: Well, information will get out in some kind of 
miraculous manner, there will not be the time to get it out because a 
predator can put up their false story, collect the donations, close the 
investment in a single day, and walk away, having scammed thousands of 
Americans out of their hard-earned cash. So we need basic rules of the 
road.
  The possibility for capital formation through the Internet through

[[Page S1829]]

crowdfunding is enormous. In 2011, Americans had invested $17 trillion 
in retirement funds. Imagine if 1 percent of those investments went 
into crowdfunding. The result would be $170 billion of investment in 
our startups and small businesses. That is extraordinarily powerful--
more powerful than loans to small businesses across this country. So it 
has huge potential.
  So a small business or startup company would provide basic financial 
information and vouch for the accuracy of this information. The company 
would explain its vision of how it is going to invest that money. The 
projects might range from small- to medium-sized. A small wedding cake 
company might want to buy an industrial oven. Another company might 
want to seek a new manufacturing line. And the crowd--that is all of 
us--surfing the Internet would visit the portal, review the financials, 
review the vision, and say: I want to be part of that, I am going to 
invest, and here is the percent of the company I get in return.
  The key to this is that the companies provide accurate information; 
otherwise, as I have described, we simply pave the path for predatory 
tactics. That would destroy the reputation of crowdfunding. That would 
destroy the ability to create a powerful capital formation market 
through the Internet.
  The amendment we are presenting does three things: It streamlines the 
process for setting up a crowdfunding portal; it streamlines the 
process for companies to list themselves on that portal; and it 
provides basic investor protections, the most important of which is to 
provide basic information about the company and for the company's 
officers and directors to ensure the accuracy of that information.
  Let's examine each of the three of these in turn. First, the 
streamlined registration for Web sites that offer crowdfunding. Our 
amendment provides two pathways: The first pathway is for a portal to 
register as a broker-dealer. The second is a streamlined funding portal 
registration. These portals agree to provide a neutral market 
environment; that is, they do not solicit purchases, they do not offer 
investment advice, and they do not handle investor funds. They operate 
a marketplace, much as the New York Stock Exchange operates a 
marketplace without recommending particular stocks.
  It also creates a unified national framework; otherwise, the portal 
would have to deal with rules from 50 States. That is an untenable 
structure. So we create a unified national structure for a portal to 
thrive in.
  Now, turning to the second piece, which is the streamlined process 
for companies to register, the amendment allows existing small 
businesses and startup companies to raise up to $1 million per year. 
That is a substantial amount for a small business. It also provides 
flexibility in how a company would do this. A company could basically 
say: Here is our target. If the target is met, the investment closes.
  So if they say: I am seeking $550,000 to do X, when Americans across 
the country have put forward enough small investments to reach that 
goal of $550,000, the investment would close. But it also allows, if 
investors decide they are offering more--maybe folks sign up, and they 
are so excited about this vision, this product, this invention, this 
strategy, that they say: I am putting up $750,000, even though you only 
asked for $550,000--it would still enable the small company to say: No, 
we can use that extra $200,000, thank you very much, if they should 
choose to do so.
  It also provides a very important provision so the small investors do 
not count against the shareholder number that drives companies to have 
to become a fully public company. That is critical and interrelates 
with other parts of the crowd formation bill before us.
  Then, turning to the third area, basic rules of the road to protect 
investors and ensure the accuracy of information companies post, 
companies participating in this marketplace must disclose their basic 
financial information: a business plan, a target offering amount, and 
the intended use.
  The Web sites are subject to oversight by the SEC and security 
regulators of their principal States. There are aggregate annual caps. 
This is a key predatory protection to prevent pump-and-dump schemes. If 
you have seen the movie ``Boiler Room,'' you will know what I am 
talking about, where folks were set to pump up a stock, and the only 
folks trading it were those who kind of received special information. 
Then, as soon as they invested--normally they are investing, buying the 
stock owned by the folks who are doing the pumping--the whole thing 
collapsed afterwards and their investment was worthless.
  So this is an essential part of making sure we establish a 
responsible marketplace that will succeed in being a foundation for 
capital formation.
  Also, we get rid of this 1-day, list-and-close process. So there is a 
21-day period--a very small amount of time in the course of raising 
capital to create a startup or to advance a small business--21 days, 
which allows for the opportunity for the sort of oversight that a 
portal can provide or the SEC can provide to stop known bad actors and 
fraudsters.
  Finally, the officers and directors are accountable for the accuracy 
of the information. This is essential. Without this sort of 
accountability, every fraudster out there will spin out a story and try 
to raise money for their schemes. But by holding them accountable for 
the accuracy of the information, it says to them: No, I cannot do that. 
I can be held accountable.
  This is exactly the right balance because it provides a due diligence 
safe harbor. It requires that any information in dispute be material. 
So it does not put the officers and directors at risk. It simply says, 
when they provide material information they have to do appropriate due 
diligence to make sure it is accurate.
  Crowdfunding has enormous potential to bring more Americans than ever 
into the exciting process of powering up startups and expanding small 
businesses. I hope in the course of the consideration of the capital 
formation bill before us, we will have a chance to present a variety of 
amendments, including this crowdfunding amendment.
  I certainly encourage my colleagues to listen very carefully to the 
points Senator Landrieu has been making, Senator Jack Reed has been 
making, Senator Durbin has been making. The point is this: Let's take 
and make a powerful tool work. Let's not, however, take and destroy a 
powerful tool by opening it to all kinds of predatory schemes and 
scams.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Louisiana.
  Ms. LANDRIEU. Mr. President, I would like to wrap up my comments in 
about 5 minutes. I see the Senator from Delaware on the Senate floor. 
He may choose to speak.
  I thank the Senator from Oregon for his comments. I think it is 
telling--very telling, actually--that this is a Tuesday afternoon at 
12:10, and normally when there is a bill that is popular on the Senate 
floor, there are lots of people who come down to speak for it. I 
understand not one person yet has shown up this morning to speak for 
the House bill we are going to be voting on today.
  I caution the Democrats to raise your awareness. That is highly 
unusual. Usually, if a bill is well thought through and is popular and 
can stand on its merit, there are any number of people on the floor 
speaking for it. The only people who have come to the floor are those 
of us warning you to read the bill, to reconsider your position, to not 
be lured by the title--JOBS bill, JOBS bill--but to read the bill and 
realize there are some far-reaching regulation elimination portions of 
this bill that are not going to be good for the small businesses 
described by the Senator from Oregon or the small businesses we 
advocate for, both Republicans and Democrats, on the Small Business 
Committee.
  Just at a time when investor confidence is increasing, where jobs are 
being created in the country, why would we go to such a far-reaching 
bill?
  Let me start with statements that have been made just in the last 24 
hours. I have quoted from Bloomberg, AARP, the chamber of commerce from 
last week and over the weekend. Today is Tuesday. These are things that 
have come in just in the last 24 hours.
  Steve Pearlstein of the Washington Post from March 18:

       What we also know from painful experience--from the 
     mortgage and credit bubble, from Enron, WorldCom and the tech 
     and telecom bubble, from the savings-and-loan

[[Page S1830]]

     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 the economics textbooks.

  Regulation is necessary.
  I am here to say we need to reduce regulations on community banks 
that are now heavily regulated by the new Sarbanes-Oxley, by their own 
State regulators. I am approving and supporting reducing regulations to 
bankers in this important legislation. That is not the issue.
  The issue is what the Senator from Oregon spoke about: the new 
developing opportunities for the Internet to be used as a powerful tool 
to raise money for ideas, for businesses.
  We can see this tremendous revolution occurring before our eyes. It 
does not mean that needs the same regulations as the old-fashioned 
financial models. But we do need some regulations. What we are saying 
is that the House bill goes too far.
  Listen to what Floyd Norris of the New York Times said:

       It gives some flavor of just how far the House bill goes 
     that one of the changes the three senators are pushing would 
     force a company trying to raise money from the public to show 
     investors an audited balance sheet.

  One of our amendments is for investors to provide an audited balance 
sheet. In the House bill we are considering, they can provide their own 
documentation--not audited by anyone, made up. Then there are no 
consequences. There are no safeguards--or very few safeguards--in the 
House bill.
  I have quoted Bloomberg now many times. Again, the terrific Bloomberg 
News editorial:

       [T]he JOBS Act goes too far. It would gut many of the 
     investor protections established just a decade ago in the 
     2002 Sarbanes-Oxley law. A wave of accounting scandals--think 
     Enron and WorldCom--had destroyed the nest eggs of millions 
     of Americans and upended investor confidence in Wall Street. 
     The relief would extend beyond small businesses and apply to 
     more than 90 percent of companies that go public.

  John P. Mello, Jr., wrote in PC World on March 18:

       During the go-go days of the dot-com era, it was common for 
     analysts to promote IPOs being offered by their investment 
     bank masters, regardless of the worth of the offering.
       The existing rules, which would be scrapped by the JOBS Act 
     now before the U.S. Senate, were designed to protect 
     investors from the conflicts of interest that damaged the IPO 
     market after the pop of the dot-com bubble, damage from which 
     it has only recently recovered.
  Let's not jump back into the briar patch. We are just getting 
ourselves untangled from it. What is the rush? This bill from the House 
has not even gone through the Banking Committee. We have spent a decade 
arguing about Sarbanes-Oxley. We had multiple hearings. We had multiple 
debates on the floor. We had people come and testify, pro or con. 
Whether you are for it, it passed with lots of public debate. I know 
there are some people who still think those regulations are too 
onerous.
  Yes, we are trying to relax them where we can. But a blanket 
exception for companies up to $1 billion in revenue, I think that is 
going a little too far, a little too fast. We have senior citizens to 
give some guidance and protection to. We have the middle class that is 
struggling from this recession. They depend on us to set the rules of 
the road.
  This is not about Big Brother, Big Sister government. People have to 
make their own choices. But when people make choices on the Internet 
based on what looks like an official documentation, they assume someone 
either in their State capital or their National Capital has framed 
these rules and regulations in a way that gives them a fighting chance.
  We do not want to legalize fraud, and that is about what the House 
bill does. It legalizes pathways to fraud. That is not what we want to 
do. How we get out of the mess we are in, I am not 100 percent sure. 
Because we have a substitute on the floor, which is the Reed-Landrieu 
substitute--I plan to vote for it. If we can get 60 votes, then we can 
get on debating that bill which is a substitute to the House bill. 
Perhaps the leadership will allow us to amend our own substitute, which 
we would be happy to do. I think we could come to some agreement within 
less than 2 days about what should be done in the Senate and then send 
the bill back over to the House for their consideration and then on to 
the President's desk, a bill we can all be proud of and confident we 
are trying to do the right thing with this new sort of frontier on 
Internet investing.
  We want to support our entrepreneurs. We want to make this process 
more democratic. We want to get out of the secret boardrooms and the 
private conversations on Wall Street. So many more people could take 
advantage, appropriately, of exciting investments in the 
entrepreneurial spirit of America. Absolutely we want to do that, but 
that is not what the House bill does.
  So let's take our time. I am urging my colleagues, if they can vote 
for the substitute and give us cloture on it, we promise we will be 
open to amendments from both sides. If we do not get cloture--I see the 
Senator from Delaware--if we do not get cloture, please vote for the 
Ex-Im Bank amendment, which is a proper amendment to the bill, and then 
vote no on cloture. We do not want to end this debate today.
  Senators will be doing their constituents a great disservice to vote 
on cloture on that House bill today. We need to fix it. We need to 
amend it and we can. Then we will have a bill we can all be proud of 
and at least be confident we have established the right safeguards and 
that we can be helpful to getting capital to Main Street and increasing 
opportunities for entrepreneurship in America today.
  I thank the Senator from Delaware. He has been so outspoken and comes 
with such knowledge on these issues. I appreciate his thoughtfulness. I 
hope he will agree to join me in voting against the House bill and for 
his support of a new crowdfunding proposal.
  I yield the floor
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. COONS. Mr. President, I am glad this Chamber is focused on job 
creation, on access to capital, on ways we can help strengthen the 
speed and growth of high promise, startup companies. I am grateful for 
the input and leadership of the Senator from Louisiana, for her hard 
work in trying to make sure we pay attention to the matter that is 
before this body and making sure we strike the right balance between 
continuing to ensure investor protection, while also providing relief 
from regulations that may hold the promise of accelerating capital 
formation and job growth in this country.
  When I go home to Delaware every night and when I attend events 
across our State every weekend, I most frequently hear from those 
deeply affected by our two long recessions, from which we are still 
growing and recovering, families who are still dealing with 
unemployment, with loss of their homes or with the threat to loss of 
their life savings, businesses that are facing a credit crunch and 
struggling to expand or to retain their employment.
  Americans, I have heard over and over, and Delawareans want us to 
come together and find solutions in this body. The good news is that 
today, in a rare bipartisan spirit, that is exactly what we are doing. 
I am glad we are taking up two different versions of this legislation 
to create a positive climate for capital formation for early stage 
companies that have enormous potential to grow, one of which has passed 
overwhelmingly in the House--and I understand has earned the public 
support of President Obama--but the other of which, as we have heard a 
number of Democratic Senators speak to today, tries to mirror those 
same core provisions but insists on investor protection and on ensuring 
that we do not overreach in opening markets in ways we may regret 
later.
  Sometimes, as the Chair knows all too well, this body deliberates 
overly long. In fact, in my first year and a half here, I have been 
struck at just how long we deliberate before acting and on how many 
measures have sat on the floor without action that should have been 
taken up promptly and quickly.
  In this case, I am concerned about the opposite; that we are rushing 
through a measure that deserves some careful consideration and review. 
In any event, making progress in access to capital for entrepreneurs 
and startup businesses is something on which I hope we can all agree. 
In both the versions of the bill that we will consider later today or 
tomorrow, there

[[Page S1831]]

are great ideas. I continue to believe that ensuring investor 
protection, market transparency, and the vibrancy of our capital 
markets through preventing fraud and ensuring clarity about what 
investors are getting is a fundamental principle that all of us should 
share.
  But without the right time to consider this legislation, I am worried 
about the potential, the potential risks for investors, the potential 
burden it may place on business. I am worried about a proposal around 
beneficial ownership in one proposal, and I am worried about concerns 
that may overly open the market to fraudsters and those who would scam 
investors on the Internet.
  There is much to like about these proposals, though, and let me 
dedicate the remainder of my time to focusing on two of them. Two of 
the strongest proposals we will consider today or tomorrow address a 
critical need for our business community, which is access to capital. 
Capital is what allows businesses to invest in new technology, new 
facilities, new workers, and in growth. Credit has, as we all know, 
been far too hard to come by in the last 2 years. But we can and should 
take action to make it more available to small business owners with 
high growth potential.
  One option, as we have heard a number of Senators address, is to 
continue to expand the opportunity for financing from the Export-Import 
Bank. The other is to make somewhat easier the pathway to initial 
public offerings. Today's legislation would ease both processes. That 
is the right kind of positive movement that will help 
create opportunity all over the United States and for companies in my 
home State of Delaware.

  First, if I can, the Export-Import Bank has long established its 
record of promoting exports and job growth. It has provided essential 
capital to help manufacturers and small businesses all over the country 
export more American-made goods. The reauthorization measure we take 
up, hopefully later today, has passed unanimously out of the Senate 
Banking Committee and has already enjoyed broad bipartisan support.
  Last year, financing from the Ex-Im Bank supported hundreds of jobs 
in my home State and thousands more across the country. The bank 
supported one dozen companies in Delaware. For example, one, Air 
Liquide, has a proprietary MEDAL membrane, a selectively permeable 
membrane that turns landfill gas into usable energy; one example of 
many innovative, local Delaware companies creating high-quality jobs in 
our communities and able to sell these products by export through Ex-Im 
Bank financing.
  Equally important, the Ex-Im Bank has not added a single cent to the 
deficit. It works to give American businesses a fair share in the 
global market. If American businesses and workers are going to be 
competitive, we have to ensure they have the support they need, 
otherwise they will continue to lose out.
  China already provides three to four times as much export financing 
as we do to help their exporters. Our companies, our manufacturers, our 
communities, simply ask for a level playing field. In my view, 
reauthorizing the Ex-Im Bank is especially vital to these companies and 
our manufacturing sector. Given the realities of the global economy, it 
is not enough for American companies to just make great products. They 
also have to be able to sell them to the burgeoning global middle 
class.
  As we all know, 95 percent of current and future customers and 
consumers live outside the United States. Reaching these consumers who 
are hungry for American products is essential to the steady growth of 
businesses of all types. Boosting American exports will be central to 
creating the kind of growth that will continue to sustain this ongoing 
economic recovery and allow our businesses to hire new workers.
  Financing from Ex-Im can come in at a critical time for businesses in 
need of capital, but it does not meet the needs of every company. For 
some other early stage companies, Delaware businesses in particular, 
when they are in need of capital, one solution is to move toward an 
initial public offering by becoming a publicly traded company.
  Today's legislation also includes an onramp to ease the path to an 
IPO. By reducing the regulatory burden on highly innovative companies 
poised for significant growth, we can encourage job creation on a great 
scale. At the moment, we are simply not seeing the rate of IPOs in our 
economy that we need to be helpful, and 92 percent of the jobs a 
company typically creates over its entire life cycle come after it goes 
public. In the 1990s, nearly half of all global IPOs happened in the 
United States. Today, that number is less than 10 percent.
  There are many reasons companies choose not to go public. But one of 
them that I have recited repeatedly in Delaware and in Washington is 
regulatory compliance under Sarbanes-Oxley section 404(b). That is a 
mouthful, but it essentially requires some auditing, some disclosures, 
some pre-IPO work, which while the spirit of the law is, in my view, 
the right one--ensuring transparency and investor protection is the 
right direction--this particular section has proven, in practice, to be 
overly burdensome to businesses with potential to be the greatest job 
creators.
  After hearing about this issue many times, I got together last fall 
with my colleague Senator Rubio to craft a solution. We found 
bipartisan agreement on this and six other issues, which we included in 
our joint legislation, the so-called AGREE Act, which we introduced 
last November.
  That legislation was chock-full of job-creating potential proposals 
designed to spur ideas and encourage more of our colleagues to come 
together on this sort of bipartisan jobs legislation we can and should 
move to.
  In the case of encouraging IPOs, that is exactly what has happened. 
Senators Schumer and Toomey have also picked up this particular 
proposal and moved further along with it. Then, on the House side, my 
longtime friend and fellow Delawarean Congressman Carney worked with 
his Republican colleague Congressman Fincher to write and pass 
legislation on this exact issue which has now come to us as part of 
this bipartisan jobs package, H.R. 3606.
  I wish to specifically congratulate Congressman Carney, who with this 
bill became the first freshman Democrat in the House to pass a major 
piece of legislation. But as we heard Senator Landrieu speak to just a 
few minutes ago and as several Senators have stood on this floor and 
raised today and last week, the question we have to ask is: In 
providing this relief from Sarbanes-Oxley 404(b), what is the 
appropriate level? What is the appropriate duration? Where do we strike 
the right balance between investor protection and accelerating capital 
formation and job growth?
  Is it at $250 million, as we proposed in the AGREE Act, $350 million 
as the democratic alternative proposes that is on the floor today or $1 
billion? That is what is provided in the bill that came over from the 
House. In my view and the view of many Democratic Senators, we need to 
take the time to debate this, discuss it, and ensure we are striking 
the balance.
  It is worth a few more hours of our time to get this matter right. 
Creating a favorable environment for businesses to create jobs can and 
should be our top priority in Washington. Since I arrived a year and a 
half ago, that has not always been the case. But today it can and 
should be the primary focus of our work. There is no reason we have to 
rush to pass this today. We can and should take some time to 
deliberate, to work through the appropriate process. It is my hope we 
will reauthorize and extend the reach of the Export-Import Bank and 
that we will move to a consensus, bipartisan bill that will strengthen 
access to capital for entrepreneurs and for early stage companies and 
that will show all the people of the United States that the House, the 
Senate, and the President can and will stand together on the side of 
job creators in this economy.

                          ____________________