By Simon Johnson
The House “JOBS” bill is a thinly disguised repeal of investor protection in the United States. This legislation would help unscrupulous people in the securities industry but it would be bad for nonfinancial businesses – by raising the risks to investors, it would push up the cost of capital for honest entrepreneurs. Investment professionals belonging to the CFA Institute have expressed their serious concerns and strong opposition. Attempts to amend this legislation – and to make it more sensible – failed in the Senate yesterday.
The Senate will vote today on whether to adopt the main provisions of the House bill. Passing this bill would be a major public policy mistake – akin to the disastrous (and bipartisan) deregulation of the financial sector in the 1990s. This kind of excessive deregulation leads to disaster – and to fiscal crisis. (For more background and the historical comparison, see this piece.)
President Obama claims he wants strong investor protection. Where is he on the specifics of the JOBS bill? Why is the White House staying so much on the sidelines during this critical Senate process? The president should rally Democratic Senators against the House bill and press again for an amended and more responsible piece of legislation.
If the Republicans refuse to agree to sensible investor protections – flying in the face of American tradition and established best practice (and lessons learned the hard way in the Great Depression) – that is a great issue for the general election in November.