Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
Attention Senators! Test results are in. Time to announce who passed and failed "the Maxine Waters test of political moderation."
As I reported last week, the Jumpstart Our Business Startups (JOBS) Act was encountering resistance in the Senate even after the House-passed bill garnered the support of President Obama and the votes of the most diehard liberals such as Reps. Barney Frank (D-Mass.) and Maxine Waters (D-Calif.). The bill, which broadens exemptions for more firms from the most onerous provisions of Sarbanes-Oxley, Dodd-Frank, and other regulations preventing entrepreneurs from raising capital, was subject to a last-minute stampede by those organs of the left to whom regulation is a religion.
The New York Times, the AFL-CIO, and other various and sundry elements began railing against this "radical deregulation" that somehow eluded Obama, Frank, and Waters. AFL-CIO boss Richard Trumka assailed a bill supported by everyone from community banks to family-run businesses such as the Wegmans supermarket chain for its provisions increasing flexibility to raise capital as a measure to "deregulate Wall Street -- voiding investor protections."
So how many Senate Democrats were swayed by these objections to a bill with investor protections deemed sufficient by Maxine Waters? The answer is that they all were. And so was Sen. Scott Brown (R-Mass.) And on the gutting of one House provision to allow the pooling of capital online through crowdfunding, 11 Senate Republicans failed the "Waters test."
Yes, the JOBS Act finally passed the Senate last Thursday 73-26, with most of the regulatory relief from the House version intact. And yes, the House passed the Senate version yesterday 380-41. The bill is on its way to President Obama, who will almost certainly sign it. This will be the biggest job-creating accomplishment of his administration, but this achievement is marred by the fact that his administration laid out much of the red tape to begin with. (And to be fair, the act also clears barriers from Sarbanes-Oxley, the red tape of the supposedly deregulatory George W. Bush era.)
But Brown and the 25 Democrat senators -- as well as Joe Lieberman (I-Conn.) -- who voted for the JOBS Act would first vote against it. Senate Majority Leader Harry Reid (D-Nev.) tried many ways to frustrate the bill, and attempted to make Republicans pay a heavy ransom if it did pass. He tried to attach an amendment to reauthorize the corporate-welfare dispensing Export-Import Bank for four years, but that failed to get 60 votes when all Republicans except Brown held fast.
Reid also set a vote for an amendment from Sens. Jack Reed (D-R.I.), Carl Levin (D-Mich.), and Mary Landrieu (D-La.) that would have weakened or gutted every measure of regulatory relief in the House JOBS Act. This bill got votes from Brown, Lieberman, and every single Senate Democrat. This includes so-called moderates like Jon Tester (D-Mont.), who would sing the praises of the House bill the day after voting to defang it.
To illustrate how radically the Senate moved on the JOBS Act, it's useful to recall an incident from the House debate in early March. In the House, the biggest dispute on the bill seemed to be who should get credit for the regulatory relief.
A provision of the JOBS Act, for instance, will save community banks millions by allowing them to raise money from 2,000 shareholders without becoming a Securities and Exchange Commission-registered firm subject to the costly mandates of Sarbanes-Oxley and the proxy provisions of Dodd-Frank (they would still be subject to many other provisions of the Dodd-Frank albatross, though). Barney Frank screamed that part of the JOBS Act was similar to a bill co-sponsored by Rep. Jim Himes (D-Conn.) that passed the House in November (and which the Democrat-controlled Senate had never acted on, a fact Frank declined to mention). Frank's attack on Rep. Jeb Hensarling (R-Texas) as "hypocritical" and "dishonest" violated House rules against personal attacks on fellow members and got him booted from the House floor for a day.
Yet this was the same provision of the bill that Jack Reed denounced on the Senate floor for allowing banks to "go dark." His amendment, according to the Independent Community Bankers of America, would actually have subjected more small banks to SEC red tape, according the Independent Community Bankers of America.
This amendment fortunately failed but Brown, Democrats, and 10 other Republicans (you can look at this vote tally to see who they were) unfortunately were successful at basically gutting the House's provisions exempting from SEC red tape up to $2 million in crowdfunding. As I told Investor's Business Daily, the Senate amendment sponsored by Brown and Jeff Merkley (D-Ore.) subjects crowdfunding to "mounds of voluminous filings with the SEC" and "imposes liability for technical mistakes."
But except for this provision, the rest of the House bill will arrive on Obama's desk intact, and likely be signed there. In addition to raising the shareholder threshold for when a company must go public and be subject to SEC rules from Sarbanes-Oxley and Dodd-Frank, the bill creates an "on-ramp" that would delay the most onerous of these rules for most new firms until five years after they go public. The legislation reflects the emerging consensus, from the respected Kauffman Foundation in Kansas City, Mo., to President Obama's Council on Jobs and Competitiveness, that startups and "emerging growth" firms less than five years old create the bulk of America's new jobs.
For once, a "jobs act" passed by Congress will at least pass the truth-in-advertising test, if not the Maxine Waters test.