Statement of John Berlau, Director of CEI’s Center for Investors and Entrepreneurs, on extending TARP for small business and on Rep. Barney Frank’s plans to kill a measure providing small businesses relief from Sarbanes-Oxley:
President Obama’s announcement that he will extend TARP — the Troubled Assets Relief Program — and keep spending its proceeds could not have come at a worse time. Credit rating agencies are looking at dropping the “Triple A” rating from the U.S. because of the trillions in spending on bailouts, stimulus and other big-government programs. The rationale put forward seems to be that because we spent this for undeserving big banks, it’s only fair to spend the rest of taxpayer dollars on small businesses, But two wrongs don’t make a right, and this money belongs to taxpayers, not to the favored recipients of politicians. Whether TARP funds go to small or big businesses, it’s still government picking winners and losers, and many innovative entrepreneurs will be left out. That’s why any money paid back to the TARP should go for general tax relief or paying down debt that all small businesses and taxpayers could benefits from.
Congress could pursue a real no-cost stimulus for the economy and small business by providing regulatory relief from the mountains of red tape that provides little benefit to investors and consumers. Unfortunately, even limited bipartisan reg relief seems to be at risk from congressional Democratic leaders. The House Financial Services Committee took a step in the right direction in November when 10 committee Democrats joined Republicans in passing an amendment by John Adler, D-N.J., and Scott Garrett, R-N.J., to exempt smaller public companies from some of the Sarbanes-Oxley accounting mandates. Rushed through Congress after the Enron implosion in 2002, Sarbanes-Oxley has cost the economy $1.4 trillion according to a University or Rochester study, and costs the average public company about $5 million to comply. This has made it much harder for smaller and mid-size businesses to raise capital by going public, and hence to expand and create jobs. And it has provided no quantifiable benefits in preventing fraud or systemic risk; indeed notorious mortgage lender Countrywide Financial passed Sarbox with flying colors.
Last month, the Obama administration supported the Adler-Garret amendment exempting small firms from some Sarbox rules, and I praised the president for this support. But this week, Committee Chairman Barney Frank is trying to strip Adler-Garrett from The Investor Protection Act on the House floor. If the president wants to make good on his rhetorical committment to small business, whom he rightly calls “the engine” of economic growth, he would tell Barney Frank to let keep the bipartisan Adler-Garrett Sarbox relief in this bill.