Does Obama’s Jobs Act pave the way for Wall Street scams?
President Barack Obama said his Jumpstart Our Business Startups, or Jobs Act, would be instrumental in getting the US back on track. Just how it would do as much, however, has opponents of the bill saying it will only dig holes for unprepared investors and entrepreneurs to later burry themselves in. While new provisions will lay the groundwork that could help many budding businesses get off the ground, others might be destined for doom if they abide by what the Jobs Act would allow.
Under new rules for startup endeavors, would-be businessmen will be able to raise more money from supporters without even having to produce a product, which while great for those who don’t have enough capital to get their projects off the ground, could be deadly for those interested in a product that cannot prove itself. The Jobs Act allows for startups to postpone filing with the Securities and Exchange Commission until it has 2,000 investors, a big bump from the 500 that had been on the books before Obama signed the bill into law last Thursday. And while this done allow a startup to steamroll through investors and collect funding to build its foundation, it also means that persons interested in participating in primitive projects can sign up by the hundreds without seeing any proof of what the company can produce. Further, it isn’t until five years after startup that the business would be expected to abide by certain Sarbanes-Oxley Act disclosures, essentially giving startups a free ride for the first few years of its existence.
After there, however, anything that could go wrong very well might.
“Did you enjoy the dot-com bubble? Well, expect a replay on an even bigger scale,” Newer reporter Kevin Spak writes of the Jobs Act. Just like how investors bought shares upon shares of website startups during the dawn of the Internet Age only to go bust down the road, skeptics say the exact scenario can easily be expected thanks to Obama’s new Act. This time, however, lawmakers have already established that five-year window, at least giving investors a heads-up to be on their feet for doomsday.
“When the dot-com bubble finally collapsed, costing the world about $5 trillion in losses, the major victims were ordinary people. We can expect a replay of the same thing now, only on a much bigger scale,” Rolling Stone columnist Matt Taibbi adds in his own report, aptly titled, “Why Obama's JOBS Act Couldn't Suck Worse.”
Taibbi continues to condemn the law in his latest write-up, using scathing major league sports comparisons to show his simply absurd Obama’s brainchild actually is when put into perspective.
“This is like formally eliminating steroid testing for the first five years of a baseball player's career. Yes, you can pretty much bet that you'll see a lot of home runs in the first few years after you institute a rule like that. But you'd better be ready to stick a lot of asterisks in the record books ten or fifteen years down the line,” writes Taibbi, who harps over and over in his article that, by signing the Jobs Act into Law, Obama “will very nearly legalize fraud in the stock market.”
Amy Wiklinson, a senior fellow in the Center for Business and Government at the Harvard Kennedy School writing for CNN, addresses the very real possibilities that the Jobs Act could bring, but oddly enough attempts to downplay the disastrous consequences as seemingly unavoidable anyway.
“Of course, there is concern about the potential for financial fraud. Will there be scams? There always are,” acknowledges Wilkinson. Taibbi and other opponents seem to see that those could-be catastrophes are more than minor mishaps down the road, though.
In an article for CNet that examines both the pros and cons of the Jobs Act, Rafe Needleman writes that while the positive aspects are definitely there, the legislation does indeed set scammers up to have a field day. And while Obama and his big-money pals, such as AOL co-founder Steve Case, say the act will be a godsend to small businesses, CNet warns that “startup CEOs could lose everything” thanks to the new rules.
Regardless what effect the Jobs Act will have on American businesses in the long run, Taibbi writes that one thing should be certain to everyone now about Barack Obama:
“Nobody should have any illusions about where he stands on Wall Street corruption after this thing.”