Washington, DC, February 15, 2012 – With unemployment still stubbornly high and the economy still in tenuous shape, the House Subcommittee on Commerce, Manufacturing, and Trade is seeking answers to those problems, launching the first in its series of hearings entitled, “Where the Jobs Are.” Wednesday’s hearing features John Berlau, Director of CEI’s Center for Investors and Entrepreneurs.
“Of all the regulations out there facing entrepreneurs, among the most important are those affecting access to capital,” Berlau explains in written testimony submitted to the subcommittee of the House Energy and Commerce Committee. Berlau notes recent research showing that firms less than five years old are responsible for nearly all net job growth. Yet these are the very firms hit by crushing regulations that make it very difficult to raise capital by going public.
“All startup firms, from food service to biotechnology to so-called green energy, need capital through debt and/or equity,” Berlau explains. “The debt side has gotten much attention with the credit crunch and the resulting lack of loans for small and midsize businesses. But the equity side – financing company growth by issuing shares of stock – is equally important. To put it simply, every dollar a firm can raise by an offering of stock to an investor is one less dollar the firm has to raise by begging to borrow it from a bank.”
Compounding the problem, regulatory burdens over the past decade, such as the Sarbanes-Oxley Act and Dodd-Frank have discouraged emerging growth firms away from going public and toward more debt financing of growth, as well as toward mergers and acquisitions rather than initial public offerings. “This has stark implications for job growth,” Berlau concludes.
Berlau urges the Senate to act on bills lifting barriers to access to capital that have passed the House with near-unanimous support and in many cases the Obama administration’s endorsement. The hearing takes place Wednesday, February 15, 2012, at 10:00 a.m. in room 2123 of the Rayburn House Office Building.
► Read the testimony
► Read more by John Berlau