Entrepreneurs Watch As Crowdvesting Bill Stalls In Senate

cayenne8 writes "The JOBS Act bill, passed in the house, has stalled in the senate. One section of this bill, which would legalize 'Crowdsourcing' in the U.S., as it is in other countries, allowing companies and startups (like indie film makers) to solicit investments for profit over the internet. This differs from sites like Kickstarter, which allow you to only donate money, in that this bill will allow the common citizen to invest for potential profit ($10K or 10% of income for investor limits) in new ideas and companies."

Comments

Actually, it's now been passed with amendments

[webplay]

http://www.nytimes.com/2012/03/23/business/senate-passes-start-ups-bill-with-amendments.html?_r=1&hp

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

So for those of us in the $50k-$100k category that limits the investment to $2,500-$5000 instead of $5,000-$10000.

Doubles the number of investors needed.

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

Re:Actually, it's now been passed with amendments

[sexconker]

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

So for those of us in the $50k-$100k category that limits the investment to $2,500-$5000 instead of $5,000-$10000.

Doubles the number of investors needed.

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

It's not cautious, it's designed to prevent you from profiting off of investments or funding your business outside of a major stock exchange.
Any American investments greater than 1 pittance must first be taxed by banks and stock brokers, then left in their control to fuck up.

You're not unamerican, are you?

Re:Actually, it's now been passed with amendments

[dgatwood]

10% of your annual income shouldn't break you financially unless you are only making $20,000 per year. Then that's three months' rent.

It should probably be more like:

• For individuals making over $100,000 annually (automatically adjusted for inflation), no maximum.
• For individuals making between $50,000 (adjusted) and $100,000 (adjusted), a maximum of 10%.
• For individuals making between the poverty line and $50,000 (adjusted), a maximum of 5%.
• For individuals making below the poverty line, a maximum of $100 (or possibly zero).

Or you might merge the two middle categories into a single category at 5% or 10%. Either way, such a scheme would prevent unscrupulous businesspeople from taking advantage of people who cannot afford to be taken advantage of. And that should be a cap on total spending for any given year, not a maximum per investment.

Also, there should be no cap if your net worth is above some figure, regardless of income. Let's call it a million dollars, though this is somewhat arbitrary. The idea, of course, is that someone with a few million bucks in the bank who decides to not work for five years can afford to blow money on stock in ways that someone with no savings who has been out of a job for five years can't.

Re:Actually, it's now been passed with amendments

[MickyTheIdiot]

I wish I could mod this up.

Every action that Congress makes, especially THIS particular election cycle, is what their lobbyist buddies want first and what is good for the overall country second. The common good motive has totally gone out the window and it's totally corrupt. There was doubt before but there isn't now.

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

10% will break most people, financially. There's a reason that only "qualified investors" are allowed to invest in high risk, high dollar ventures. It's certainly not the "free market" answer the libertarians want, but it's also not a conspiracy. Note that this investing happens long, long before the stock exchagne and brokers that you retardadly assume is involved.

Re:Actually, it's now been passed with amendments

[datavirtue]

What do they care about MY finances?

Re:Actually, it's now been passed with amendments

[tidepool]

10% of your annual income shouldn't break you financially unless you are only making $20,000 per year. Then that's three months' rent.

It should probably be more like:

• For individuals making over $100,000 annually (automatically adjusted for inflation), no maximum.
• For individuals making between $50,000 (adjusted) and $100,000 (adjusted), a maximum of 10%.
• For individuals making between the poverty line and $50,000 (adjusted), a maximum of 5%.
• For individuals making below the poverty line, a maximum of $100 (or possibly zero).

Or you might merge the two middle categories into a single category at 5% or 10%. Either way, such a scheme would prevent unscrupulous businesspeople from taking advantage of people who cannot afford to be taken advantage of. And that should be a cap on total spending for any given year, not a maximum per investment.

Two points:

Just curious your thoughts on all the state lotteries, both 'instant win scratch tickets' and those drawn via numbers. There is NO cap on how many tickets people buy, and we've all seen people in the gas stations dropping $60 on tickets and $10 of gas for their truck. If you talk to the workers, some of them are regulars on intervals as frequent as every morning, some just once a week, and some, well, just once. To me, having someone invest in (this company, whatever it is) in order to hopefully create a profit for themselves is a) more rewarding for society as a whole (perhaps not the state budgets...) b) More rewarding to the person doing the 'investing' (the prior scratch ticket winner), as it requires thought and far more interest than pure monetarily expectations.

Secondly, Why should one exclude 'the poor' (you're pretty-much referring to myself, but I am NOT calling myself poor... ) from taking action into a company or companies that they feel have great/good/marketable ideas? My of my friends are in the same financial 'boat' as I am, give / take, and they often have smart ideas that could be worth investing in....

Cheers,

Re:Actually, it's now been passed with amendments

[tidepool]

Shit, left the quote on:

Two points:

Just curious your thoughts on all the state lotteries, both 'instant win scratch tickets' and those drawn via numbers. There is NO cap on how many tickets people buy, and we've all seen people in the gas stations dropping $60 on tickets and $10 of gas for their truck. If you talk to the workers, some of them are regulars on intervals as frequent as every morning, some just once a week, and some, well, just once. To me, having someone invest in (this company, whatever it is) in order to hopefully create a profit for themselves is a) more rewarding for society as a whole (perhaps not the state budgets...) b) More rewarding to the person doing the 'investing' (the prior scratch ticket winner), as it requires thought and far more interest than pure monetarily expectations.

Secondly, Why should one exclude 'the poor' (you're pretty-much referring to myself, but I am NOT calling myself poor... ) from taking action into a company or companies that they feel have great/good/marketable ideas? My of my friends are in the same financial 'boat' as I am, give / take, and they often have smart ideas that could be worth investing in....

Cheers,

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

The rent thing I didn't get the point of. Typically expenditures scale with income.
So, if you're earning $20k a year, you are probably sharing rent expenses with others and/or living in a part of the country where rent is cheaper.

Anyway. Let people decide what they want to do with their money. I can totally see a community of the poor pooling their resources to build some cool business, except you just capped them at 0% with your scheme.

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

Since when is "Americanism" determined by government regulations? What the hell? Any real American wants this shit cleaned up, and the sooner the better. Where's our Teddy Roosevelt when we need him?

P.S. are you sure you're pro-American? The tone of your post sounds like you're not. Stop telling other people what "un-American" means.

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

For many people, even that amount will cause serious problems and there is a contradiction here - if an investment is large enough to be meaningful, it is large enough that people don't deserve to get ripped off. There is a risk of 'salami-fraud': rip hundreds of people off for a relatively small amount and nobody will bother to spend thousands in legal fees getting it back. In addition, the limit seems to be per investment - a dubious operation could sell multiple different dodgy 'investments' and get more money that way.

Even ignoring that, there are basically four problems that arise:

• Scammers touting completely fake companies and taking money from people who think they are investing in a start-up
• People who raise the money and then waste it all on perks and bullshit, safe in the knowledge that as they never had to have proper internal controls over expenses or produce GAAP-compliant accounts it will never be easy to prove fraud or mis-representation against them
• Hopelessly poorly-run companies which lose all the money but as they have no proper accounting they don't realise it until they go spectacularly insolvent and creditors, shareholders etc get shafted.
• Legitimate companies that fail, but the founders are then accused by some of the investors of being one of the above and are endlessly harassed and besmirched. In my experience small-time investors are often prone to consider that if they have lost money in a business then 'someone must have stolen it'. That's one reason why I wouldn't even want to take money from investors to start a business unless I was confident that they understood at least basic finance and accounting.

Re:Actually, it's now been passed with amendments

[BlueStrat]

For many people, even that amount will cause serious problems...

That may be true, but beyond assuring there is no outright fraud or dishonest dealing and/or breach of agreements/contracts, what freaking business is it of the government whether I invest my wealth wisely or unwisely?

The same logic would dictate that individuals & households should have weekly/monthly/yearly budgets & financial planning performed by the government as well, particularly for the poor, as they're typically the ones with the worst wealth-management skills.

Heck, just have the government own and run all financial/wealth/investment both corporate/business & personal. After all, I guess only the government is smart enough to run your life and the nation's economy, and we wouldn't want anyone to suffer because of their poor choices.

Man, we're hosed.

Strat

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

For many people, even that amount will cause serious problems...

That may be true, but beyond assuring there is no outright fraud or dishonest dealing and/or breach of agreements/contracts, what freaking business is it of the government whether I invest my wealth wisely or unwisely?

The same logic would dictate that individuals & households should have weekly/monthly/yearly budgets & financial planning performed by the government as well, particularly for the poor, as they're typically the ones with the worst wealth-management skills.

Heck, just have the government own and run all financial/wealth/investment both corporate/business & personal. After all, I guess only the government is smart enough to run your life and the nation's economy, and we wouldn't want anyone to suffer because of their poor choices.

Possibly you could climb down off that superior-quality regulation-free libertarian soapbox, and consider that it is very hard to be dishonest or breach agreements when you are not actually required to disclose any information (such as audited accounts), to disclose such information in a way that is easily understandable or comparable, or make any particular covenants to adhere to standards of internal control or carry out any future actions. "My profit* last year was $5 million from an investment of $75,000! Invest now!"

Stock exchange regulations were not created by some Communist fifth column in order to bring about the demise of capitalism. In theory there are serious asymmetric information and principal-agent issues that suggest that a pure caveat-emptor approach to public companies is questionable. In practice they were created as a response to very real and very repeated malfeasance over several lifetimes of experience of stock-exchange frauds. We have already seen stock exchanges where anybody can list any old shit with no rules of conduct, and they stink.

* Profit calculated by reference to ACAP - anonymous coward accounting principles. Future revenues capitalized at a discount rate of 0.05%. Quatro-hyperdyne sanction in effect. Results under other accounting principles may vary.

Re:Actually, it's now been passed with amendments

[Presto Vivace]

Defraud investor's act would have been a better name for this. And it passed the Senate.

Re:Actually, it's now been passed with amendments

[turkeyfish]

Because if you merely use your finances to pollute the planet, you are doing little more than killing everyone. Of course, most of the time people will be just seeing most of their "investment" go to great bars, restaurants, and hookers on Wall Street.

Re:Actually, it's now been passed with amendments

[turkeyfish]

"That may be true, but beyond assuring there is no outright fraud or dishonest dealing and/or breach of agreements/contracts, what freaking business is it of the government whether I invest my wealth wisely or unwisely?"

Even the biggest fools who have ever taken the time to study the history of Wall Street will recognize the assumption that there won't be any outright fraud, dishonest, or breach of contracts is a rather big assumption. Consequently, this bill is little more than a license for Wall Street firms to steal, not that anything else is new.

Re:Actually, it's now been passed with amendments

[BlueStrat]

Even the biggest fools who have ever taken the time to study the history of Wall Street will recognize the assumption that there won't be any outright fraud, dishonest, or breach of contracts is a rather big assumption.

So, you're saying that because there will be a non-zero amount of fraud, etc, that regular people need to be kept out and only the rich and connected, bankers, corporations, and the government should be allowed the chance to invest their own money and choose their own risks as they see fit?

By the way, less regulation =/= no regulation, stop with the strawman. I plainly specified in my first sentence the assumption of sufficient regulation & oversight to ensure a relatively fair and honest market as such things go. Nothing is perfect.

Keeping people from participating in one of the major ways to grow capital that way smacks of class warfare against the poor & middle classes. It prevents them from being able to judge their own risks, use their savvy & cunning, and grow their money in the same way those who are in the "1%" do, and many times did to get into that 1% in the first place.

It's another obstacle placed in the way of the lower classes to keep upwards-migration to a manageable (for the rich/powerful in business and government) minimum, and thus maintain the status-quot.

Strat

Re:Actually, it's now been passed with amendments

[Anonymous Coward]

There's really no need for the anti-corporation propoganda here. It's a band-aid for a real potential problem.

Entities soliciting start-up capital won't be subject to the same kinds of scrutiny that a publicly traded company would be. There's very little way to guarantee the person you're investing in isn't going to just walk with the money, or that they're simply working with really bad numbers that don't add up to a viable company, much less profitability.

Group On barely made it past review. Now imagine that every jackass in the world that can barely add and subtract starts asking for large sums of money as investment capital. These people, unlike people on Kickstarter, have a greater-than-zero expectation of return. However, it's a much, much riskier investment than a real company.

So yeah, they limit how much exposure a person can gamble with, and it's a very good idea. Because people are stupid.

If you make over $100k, nobody is too worried about you throwing $10k at something and having it fail. It's a little different for someone that makes $30k (which is much closer to the average american worker).

Re:Actually, it's now been passed with amendments

[Lotana]

what freaking business is it of the government whether I invest my wealth wisely or unwisely?

Oh, it is very much government's business.

If you are an idiot, invest all your money/assets unwisely and lose it all, what is in store for you next? Are you just going to quetly lie down and die?

No, you will crawl to the government and start begging for help. If they don't provide you with something to make your ends meet, you will turn to crime. No matter how cynical you are regarding the government, it is not in their best interest or image to have their citizens at such stage. It kind of affects their bottom line and approval ratings.

Thus they need to somehow make it more difficult for you to do something stupid. Imposing limits on how much you can invest in a potentially risky venture seems like an easy way to protect an average, easily-manipulated idiots from themselves.

Re:Actually, it's now been passed with amendments

[BlueStrat]

If you are an idiot, invest all your money/assets unwisely and lose it all, what is in store for you next? Are you just going to quetly lie down and die?

No, you will crawl to the government and start begging for help. If they don't provide you with something to make your ends meet, you will turn to crime. No matter how cynical you are regarding the government, it is not in their best interest or image to have their citizens at such stage. It kind of affects their bottom line and approval ratings.

Thus they need to somehow make it more difficult for you to do something stupid. Imposing limits on how much you can invest in a potentially risky venture seems like an easy way to protect an average, easily-manipulated idiots from themselves.

My god, you're right! We need the government to make *all* our decisions for us and save us from ourselves! What if people choose the wrong place to live, choose the wrong job, choose the wrong hobbies, join the wrong religion or political party, or associate with the wrong people? What if they engage in risky things like ski-jumping or rock-climbing and injure or kill themselves? Hell, what if they go to a *casino* and lose their house!?!?

The only thing more costly to a society than people's poor choices is the price to that society if the freedom/ability to make bad choices is removed. Most successful business owners started and failed at multiple business ventures before they learned enough and gained enough experience through those failures to create a successful venture. The same with nearly every single inventor.

If no opportunity to take risks and no consequences for failure are allowed to exist, there is no opportunity to succeed. One must exist for the other to exist. It's a ying/yang relationship. To attempt to do away with risking failure and failure's consequences and expect success is like trying to make a DC current flow through a conductor with only the positive or only the negative pole of a battery connected.

Strat

When was it made illegal?

[cpu6502]

Why was Profiting from Crowdsourcing a movie, song, or book made illegal? And when did it happen.

Re:When was it made illegal?

[blakelarson]

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars. Only when you have a detailed, SEC-approved prospectus can you sell shares publicly as a C-corp. This is an expensive endeavor for small operations. So they raise "private" money, but mostly from accredited investors, who are supposedly rich enough to not do stupid things with their money. Or at least have the resources to sue the people running the company. Kinda arbitrary. But the key is that a company cannot publicly solicit investors. I think that crowdsourcing is a great idea, but we need to be sure to cover the potential for abuse. There's a reason the laws are in place. I'd love to be able to raise some cash this way.

Re:When was it made illegal?

[LehiNephi]

Crowdsourcing is not specifically illegal, but there are many regulations and laws which apply to companies that allow investments. For a small business, these regulations can be enormously onerous--rules for how finances are tracked, requirements for independent auditors, etc. Mostly, this bill waives the requirements for such a small business for the first few years. I think there's an assumption that the company will either die out in that period or become large enough that it can afford those regulatory expenses.

Re:When was it made illegal?

[jfengel]

The laws were put into place to discourage fraud. If you want to get people to invest in your project, you need to go through a formal prospectus. Otherwise, it's easy to promise people the moon and return nothing. It goes back to the founding of the SEC in the 1930s, and additional legislation passed since then.

The success stories for Kickstarter are inspiring, but the potential for ripoffs is enormous. You need to know just what it is you're buying into. The amount of money that can be lost to fraud is comparatively small, but it's still as much as $10,000, and a lot of people can't afford to lose that. Especially the ones most likely to make desperate, ill-informed choices when somebody promises them enormous returns.

Re:When was it made illegal?

[billcopc]

Because it's over the "internet", and that scares the living daylights out of the illiterate proto-humanoids we westerners call "senators".

Perhaps K street was feeling threatened.

Re:When was it made illegal?

[mcmonkey]

Why was Profiting from Crowdsourcing a movie, song, or book made illegal? And when did it happen.

My question as well. Follow the crowd sourcing link in TFS. It's actually not just a link to a wikipedia entry defining crowd sourcing.

As Amy Cortese writes in the NYTimes:

Under those laws, crafted largely in the 1930s, the sites would have to either limit the fund-raising to wealthy investors, who the S.E.C. deems sophisticated, or go through a registration process that would prove too costly given the small sums being sought

Re:When was it made illegal?

[Anonymous Coward]

That is exactly what the Senate amendments to the bill address: http://www.crowdsourcing.org/editorial/a-look-at-the-proposed-amendments-to-the-crowdfunding-bill/12669

The gist of the amendments (which I believe just passed) tighten up the certification and disclosure rules, the requirements for investors (based on annual income), and some important arcana on who is allowed to advertise these things (e.g., no pump-and-dump schemes.) The amendments strike me as a fairly good idea-- if you're asking for a half a million dollars from random people you don't know, then, yes, you're gonna get a CPA to certify and publicize your finances.

With those amendments, the overall idea also strikes me as a good idea. Sanity seems to have prevailed, assuming the House approves the amendments.

Re:When was it made illegal?

[cpu6502]

>>> I'd love to be able to raise some cash this way.

You can. See this link - http://piratemyfilm.com/ (And Max Keiser's pitch: http://maxkeiser.com/2009/04/07/max-keiser-radio-pitches-piratemyfilmcom/ )

Re:When was it made illegal?

[cpu6502]

"SEC registration... too costly". Yeah okay. That figures. I won't be surprised if RIAA and the other megacorp content types try to kill the amendment to this bill. (Gotta protect their outdated model and money.)

Re:When was it made illegal?

[blakelarson]

I agree. Sounds like it's moving in the right direction. Just providing a little perspective on why things are the way they are.

Re:When was it made illegal?

[Animats]

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars.

Right. There is a long, long history of investment scams, from John Law's bank to Florida real estate to "High Yield Investment Plans. The current big scam thing is "distressed real estate". That's why we have SEC registration and mandatory disclosures. Here are some recent scams of that type.

"Crowdfunding" is about selling unregistered securities to individuals. This usually ends badly.

If anything, the rules on who is a "qualified investor" and can invest in private placements should be tightened up. At present, pension funds are considered "qualified investors", which means they can invest in hedge funds. That didn't work out too well around 2008.

Re:When was it made illegal?

[nedlohs]

They has "internet" in the 1930s?

Al Gore wasn't even born, that impossible!

Re:When was it made illegal?

[cpu6502]

Yeah it's sad when uneducated persons make unwise investments, and then lose everything. I knew a guy who thought he'd won the lottery, and stupidly mailed-off the money.

Then he lost his job, which was no big deal but the unemployment eventually ran-out (2 years). NOW he's dead, because he had ~30,000 racked-up on credit cards with no incoming money, and unable to pay his bills, so he ended his life.

Re:When was it made illegal?

[blakelarson]

Sad part: since he was rich, he was considered knowledgeable according to the SEC. I don't know a better way of determining the financial savvy of private investors, but assets / income surely can't be the only way.

Re:When was it made illegal?

[pclminion]

Then he lost his job, which was no big deal but the unemployment eventually ran-out (2 years). NOW he's dead, because he had ~30,000 racked-up on credit cards with no incoming money, and unable to pay his bills, so he ended his life.

Guess it didn't occur to him to maybe sell some of the shit he bought on credit, to pay that balance (partially) down? He thought ending his life was preferable to giving up whatever junk he bought. That's not stupid, that's crazy.

Re:When was it made illegal?

[Bengie]

When you give money into a KickStarter project, you are in the exact same boat, except you aren't allowed to treat your donated money as an investment, outside of the good generated.

If they pass this, then at least I would have a *chance* at getting a return on my money. When given the choice between a $100 "donation" and a $100 "investment", but both ways I get a video-game out of it, I'll take the investment.

Re:When was it made illegal?

[MickyTheIdiot]

You may be right, but you need to remember it's a pretty god damn easy thing to do to second guess someone.

Re:When was it made illegal?

[TheSync]

The laws were put into place to discourage fraud. If you want to get people to invest in your project, you need to go through a formal prospectus.

In most start-ups, the risk of business failure is thousands of times greater than the risk of fraud!

I would love to know whether the rules in place provide enough fraud reduction benefit to make up for the costs of the registration. You should be required to say "YOU ARE LIKELY TO LOSE ALL YOUR MONEY" to investors, anything else is unlikely to be of much benefit vs. cost.

Re:When was it made illegal?

[datavirtue]

Uh....a measly 30k in debt? Not enough to end your life, he obviously had other issues. Next to my life and happiness I do not care one iota about my credit card bills.

Re:When was it made illegal?

[datavirtue]

None of the states have an under-funded pension.

Re:When was it made illegal?

[Anonymous Coward]

Look at the rate of kickstarter projects getting cancelled, but getting lots of press (before being canceled)

Re:When was it made illegal?

[camperdave]

Fraud? Invest? Prospectus? Returns? Money? I thought we were talking about crowdsourcing: Getting a crowd of people to perform a task. Wikipedia is crowdsourced. Asking Slashdot is crowdsourcing. Even the Ansari X-prize competitions and the DARPA challenges are crowdsourcing. No money changes hands (mostly). No investment takes place.

Re:When was it made illegal?

[cdrguru]

A huge problem today is pension funds investing, period.

What a pension fund wants is some growth but stable growth and a solid indication that they aren't going to lose anything, ever. That is perfect for AAA bonds but really awful for investing in company stock in any form. Since these funds have so much money to invest - usually in big blocks - they have a great deal of influence. Which means once your company is deeply in with a pension fund or two as major stockholders the company must be run in a manner that produces steady, stable growth and will never, ever lose money. This generates a risk-adverse environment and means companies that are supposed to be engaging in high-risk investments for the future have to change their methodolgy if they want to keep their major stockholders happy.

Hence we have a lot of companies that should be throwing cash at projects which might fail but might also pay off big deciding not to do much at all like that. Risk-adverse means no big risks, no big rewards, but happy stockholders. And when the risk-adverse stockholders are holding more than 50% of the company's stock the board is going to pretty much have to go along with this new strategy or get replaced with people that have the proper respect for the pension fund's money.

This is what we have gotten ourselves into today, pretty much worldwide. By letting the pension funds in the door - heck, we encouraged them with special road shows tailored to the "institutional investors" - we have made sure that high-risk projects and products are just never approved.

Re:When was it made illegal?

[petsounds]

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars.

And how exactly is this different from every election campaign? You could consider every campaign contribution an "investment" (corporations certainly do), and your "return" is the policies you want enacted. And the individual investors in these political candidates almost invariably get tricked.

Re:When was it made illegal?

[cpu6502]

The creditors took his storage shed. That left him with nothing but his house (mostly empty). Of course he could have sold his house, paid off his cards, and then lived in an apartment. But some people don't want to give-up the house. (We're seeing that right now with people unable to pay their mortgages but refusing to leave.)

Re:When was it made illegal?

[Rakishi]

Until you go broke, then you expect the bureaucrat to provide you with welfare, free healthcare, subsidized housing and so on and so on.

Re:When was it made illegal?

[jdgeorge]

The laws were put into place to discourage fraud. If you want to get people to invest in your project, you need to go through a formal prospectus.

In most start-ups, the risk of business failure is thousands of times greater than the risk of fraud!

The most gloomy projections for new business survival are around 10%, and then it's a matter of semantics (in other words, business not making as much money as projected constitutes "failure"). Analysis of the 10-year survival rate of businesses shows about 30%.

On the other hand, I personally receive 1 or more NEW fraudulent investment "opportunities" every day. Whoopee!

The point is that the regulations are there to keep the legitimate investments from looking like the fraudulent ones. You can still lose everything (and more) in the stock market, but you can be more confident that you are dealing with real businesses than when you jump on unvetted "Internet opportunities".

Re:When was it made illegal?

[bolthole]

By letting the pension funds in the door ... we have made sure that high-risk projects and products are just never approved.

Theres nothing wrong with "high risk projects",even in that culture.. you just have to make sure that the amount of capital invested in the "high risk project", is an amount you can afford to lose.

aka, "Never gamble with money you cant afford to lose".

This is just GOOD BUSINESS PRACTICE. So if people arent doing high risk stuff, it isnt because of what you said. It's more likely because the people in control are looking for short-term gain, over larger but longer-term gain.

This is not a new phenomenon.

Re:When was it made illegal?

[jfengel]

The goal is to ensure that the "chance" you're taking is on the success or failure of the project, not whether the person pushing it is a fraud.

Because you don't always get a video game out of it: some Kickstarter projects just plain fail. That's to be expected; it's the joys of entrepreneurship, as long as they fail honestly.

Re:When was it made illegal?

[jfengel]

We're talking more about "crowdvesting" than crowdsourcing. The bill is about when there's money involved.

Right now, it's possible to accept donations, but not to return profits. That seems counterintuitive, but people are more likely to give when they think there's a chance of getting money back, and that leads to opportunities for fraud.

Re:When was it made illegal?

[cayenne8]

Yeah it's sad when uneducated persons make unwise investments, and then lose everything. I knew a guy who thought he'd won the lottery, and stupidly mailed-off the money.

First, I'm not making light whatsoever to the tragic events that your friend experienced.

However, I must comment, that I don't believe it the the government's constitutional mandate to protect any individual from their own ignorance or stupidity, or just bad decisions.

I fear too much regulation over what a person does, is basically forcing everyone to adhere to rules to protect the lowest common denominator....

I want more freedom to take fiscal risks like investment in very small businesses....I'm smart enough to read up, research...and even with that, I'm ready to fail and lose money.

That's the risk you take, but you can make money and help startups with really good ideas get going that might not otherwise attract the interests of VC's that have the millions of dollars and lawyers on reserve.

Sure, basic laws against fraud should be in place, but I should be free in this country to make most decisions with most every aspect of my life, and be responsible for the outcomes of said decisions.

Again, I feel for your loss of your friend...but it happens, and I don't feel it is the function of the govt. to protect us from ourselves....which hinders freedom for all.

Re:When was it made illegal?

[cayenne8]

The success stories for Kickstarter are inspiring, but the potential for ripoffs is enormous. You need to know just what it is you're buying into. The amount of money that can be lost to fraud is comparatively small, but it's still as much as $10,000, and a lot of people can't afford to lose that. Especially the ones most likely to make desperate, ill-informed choices when somebody promises them enormous returns.

So, we should force everyone be limited in what they want to do with their money based on the lowest common denominator of intelligence, wealth or aversion to risk?

Since when did it become the governments mandate to protect people from themselves? Where exactly is this in the constitution?

There are already laws on the books against fraud....and they should be prosecuted, but there's not reason to limit people with the means and ability to research and make critical decisions as to what they can do with their money.

We're becoming over regulated in most all aspects of our lives by the laws trying to protect people from themselves...some people are going to lose in life and fuck up......we should let them rather than limit people on what they want to do that can do the right thing and live with the repercussions of their actions.

People that can't afford to lose $5 can easily buy their paycheck worth of lottery tickets or go to a casino....there are always going to be poor and stupid people, a sucker born every minute, but we shouldn't limit those that have wealth and capabilities to live and take risks within their means because a few idiots out there might lose their shirts.

Re:When was it made illegal?

[cayenne8]

But, there are already laws on the books against fraud.....

Re:When was it made illegal?

[jfengel]

And they're generally not going to be enforced over amounts on the order of a few thousand dollars. It costs the FBI more than a few thousand dollars to investigate.

Re:When was it made illegal?

[s73v3r]

But some people don't want to give-up the house. (We're seeing that right now with people unable to pay their mortgages but refusing to leave.)

Much of that is probably because they feel the banks have cheated them, or are yanking them around with respect to refinancing and such.

I really can't say I blame them.

Re:When was it made illegal?

[s73v3r]

Yes. History has taught us this.

Re:When was it made illegal?

[cayenne8]

Yes. History has taught us this.

I don't know which way you're going on this...care to expand on your thoughts a bit?

Re:When was it made illegal?

[cayenne8]

So, there's not state courts?

Re:When was it made illegal?

[cutinf]

If anything, the rules on who is a "qualified investor" and can invest in private placements should be tightened up. At present, pension funds are considered "qualified investors", which means they can invest in hedge funds. That didn't work out too well around 2008.

While I agree with the sentiment of your overall post, that adequate disclosure helps protect individual investors, I take issue with the part quoted.

• Pension funds are hardly individual investors. They generally have investment committees and experienced portfolio managers. While some of these managers should be fired for incompetence, that is on a case by case basis, not systemic.
• I don't see how being invested in Hedge Funds (HF) in 2008 was terrible for pensions. HF typically take the place of public or private equity as one of the riskier asset classes held. HF instead of equity was a good call relatively speaking. For 2008, HF were -18.3% (ouch) but S&P 500 was -37%! (1) . I'm guessing you are confusing HFs with something that actually blew up like bank stocks or bond insurers, or the market in general?
• If the proper level of disclosure is there, why should only rich (the practical implementations of qualified investor) people be allowed to make any investment returns on smaller, exciting companies?

Re:When was it made illegal?

[spasm]

When a gentleman by the name of Ponzi started 'crowdsourcing' investment in his fine scheme.
 
I know bashing 'excessive government regulation' is common in the US, but when an entire field of endeavor is banned by regulation, it's usually worth looking at the historical reasons why that happened, and taking some care to ensure that (justifiable) revisions to that regulatory response don't allow the reemergence of the original problem.

Re:When was it made illegal?

[turkeyfish]

And then they call it a Wall Street and Banking Bailout. We went here before. Its just we didn't learn anything, so we have to do it again.

Re:When was it made illegal?

[turkeyfish]

Yeah, especially the Bernie Madoff's of the world.

Re:When was it made illegal?

[turkeyfish]

"That's to be expected; it's the joys of entrepreneurship, as long as they fail honestly."

Which is precisely why so many who run such business arrangements decide its far more profitable to let the company fail "honestly", while they profit far more by sticking the money in their pockets before it all comes crashing down. Its called the Bain Capital Management philosophy to business success.

Re:When was it made illegal?

[turkeyfish]

"In most start-ups, the risk of business failure is thousands of times greater than the risk of fraud!"

Exactly, since the best fraudsters always make it look as though it wasn't fraud.

Re:When was it made illegal?

[Patch86]

The thought that someone would rather kill themselves than give up their house and rent an apartment (or a smaller house) is incredibly sad. It's only a house, in the end. Life must be easy come, easy go for some people.

I don't like the thought that some people will give up their one and only life over something so trivial. You'd need to prise my life out of my cold dead hands...

Re:When was it made illegal?

[rtb61]

Wake up. Paid of politicians approved a law to let vulture capitalists rip off as many people as possible as face as possible.

Large financial institution will set up off balance sheet companies which in turn will create hundreds even thousands of pseudo independent companies, each capable of generating a million dollars per annum and in conjunction billions of dollars.

The resources of major financial corporations will be used to fabricate the illusory companies, create the marketing material and then sell it to investors these corporations already have access to. Can't squeeze enough out of one individual per investment, no problem, have them invest in ten different companies at once, all companies owned by an off balance sheet companies of the parent corporations.

Guaranteed somewhere in that trail of ownership will be an offshore tax haven where corporate executives of the parent corporation steal most of the profits.

You can imagine all sorts of illusory investment vehicles, where pension funds (via off shore purchasing commissions) can investment in hundreds of startup at the same time to the tune hundreds of millions of dollars.

The reason it has always been so difficult for small business to get start funds up is because historically 9 out of 10 go fucking belly up, only 1 in 10 survive. This legislation is insane.

Re:When was it made illegal?

[Anonymous Coward]

Typically the investment policy of a pension plan is designed to manage the tradeoffs between risk and expected return. Generally, the investment policy puts a cap on holdings of any single security, so generally a plan is never heavily invested in the performance of a single company.

And no, generally they do not have investment policies that try to avoid losing anything. If you take no risks at all, your rate of return is the hypothetical risk free rate. On a long term basis, investments which carry an exposure to risk provide a risk premium over this baseline rate because market participants try to price assets such that they are rewarded for taking on the risk. Low risk bonds have the lowest rate of return because their risks are limited to default and movements in interest rates. The expected return on a small cap index fund is higher than a broad index like the S&P500, but will have larger swings in values. Generally, a pension fund is going to pursue investments that reflect the risk profile they're willing to take on rather than try to influence the companies they hold to more closely match their desired risk profile. And generally they do invest in some riskier projects either through high yield bond funds (i.e. diversified junk bond portfolios) or more speculative plays on equities using only a small portion of their assets.

All that said, recent experience has been perverse, with long run bonds issued in the 80s and 90s outperforming equities over the same period. Recent experience has been that the riskier investments haven't had enough upswings to offset their downswings, and as a result, yes, risk aversion is at an all time high. Hopefully this will pass, since the thought of there being no reward for taking measured risks kind of sucks all of the color out of life.

Re:When was it made illegal?

[Hognoxious]

The author was on such a libertarian fapfest he got his retarded neologisms in a twist.

Re:When was it made illegal?

[niado]

I don't like the thought that some people will give up their one and only life over something so trivial. You'd need to prise my life out of my cold dead hands...

Yes, and this is how all sane people think. Suicide is not driven by actual real reasons - it is driven by mental illness. Sometimes mental stress or other outside factors can contribute to the illness, but when someone gets to the point where they would actually end their own life they can no longer be considered sane.

Which is why it is sad every time it happens. It irks me when people look down on suicide victims for their 'cowardice' or whatever else. Death by suicide is in almost all cases death by illness - comparable to cancer or heart disease.

Re:When was it made illegal?

[Anonymous Coward]

"Suicide is not driven by actual real reasons - it is driven by mental illness"

A larger powerful government drugs you up with amphetamine, sticks you in a torture chamber. After 20 years of constant pain and plagued by nightmares when you're actually allowed to sleep, they give you an option to kill yourself.

Are you saying it is not logical to end it?

Is life so precious that one would rather live in an effective "Hell", than to not exist? Isn't the definition of a "hell", a place so horrible, kept alive against your will is the ultimate punishment?

I do agree that the huge bulk of cases are depression/etc, but at what point does it actually become logical to commit suicide? To say "never" is just as illogical.

Boom & Bust

[Anonymous Coward]

Well... at least we know what will cause our next economic bubble and inevitable collapse.

Re:Boom & Bust

[LehiNephi]

I suspect you're not familiar with the specifics of the bill--it limits how much an individual can invest in such a company--only up to 10% of their income or $10k (whichever is less) in the less-restrictive version of the bill. It ain't gonna make any investor go bankrupt who isn't headed there already.

Re:Boom & Bust

[characterZer0]

It ain't gonna make any investor go bankrupt who isn't headed there already.

Better for them to go bankrupt giving their money to overseas scammers running shell companies in the US that will launder money out of the country than giving it to overseas scammers running shell companies in Nigeria.

Wait.

Re:Boom & Bust

[turkeyfish]

"the bill--it limits how much an individual can invest in such a company--only up to 10% of their income or $10k"

And of course there is nothing in the bill that says an "investor" can't invest 10% of his income in each of 10 companies for a full 100%, which of course when 99% of all investors fail, will have no material affect on the economy, just like the stock market crash in 2008. Funny how that managed to affect even those who didn't invest in the market at all.

This bill is a gift to the slow thinkers, who didn't learn anything in 2008 so we will have to repeat the performance to get their attention.

Uhm...

[Black Parrot]

This bill is about a *lot* more than crowdsourcing, and not everyone thinks most of it is a good idea.

Re:Uhm...

[cayenne8]

Just curious, what parts do others, or well...YOU find objectionable.

I've not read the rest of the bill...this one section caught my eye and I liked it...but what other parts are in there that are objectionable that you've seen?

Re:Uhm...

[turkeyfish]

See the interesting post "Scam?" below. Basically, this bill just gives the green light to Wall Street boiler rooms to start up their scams all over again, except this time there is even less money for enforcement. Sure they eventually caught Bernie, but how much money did they actually get back?

Scam?

[koan]

"Of course, supporters don’t describe it that way. They say the JOBS Act — for Jumpstart our Business Startups — would remove burdensome regulations that they claim have made it too difficult for companies to raise money from investors, impeding their ability to grow and hire.

Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness. "
https://www.nytimes.com/2012/03/11/opinion/sunday/washington-has-a-very-short-memory.html?_r=3&partner=rssnyt&emc=rss

Re:Scam?

[koan]

Laugh... you modded down the NYT?

Re:Scam?

[Anonymous Coward]

"...the JOBS Act — for Jumpstart our Business Startups - would remove burdensome regulations...

Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness. "

I was not aware that Enron, Lehman Brothers, Fannie and Freddie, and the large corporate banks involved in mortgages were considered "start ups". Thank you for educating me on that.

Re:Scam?

[cpu6502]

During George "duh" Bush's administration the number of regulations increased from 110,000 to 150,000 pages. The New York Times must be using a definition of the word "deregulation" that I am not familiar with, because I would call a ~50% increase in regulations the Exact Opposite of deregulation.

I cannot comment of the dot-com or enron debacles, but it is very clear to me the mortgage bubble was created by the Government, its Fannie/Freddie organizations, and the private bank monopoly known as the Fed. They colluded with one another to provide tons of cheap low-interest loans, and that fueled the rapid rise in demand for limited housing, and eventual burst of the bubble in 2007-8. If anything it was TOO MUCH regulation (Congress insisting everyone should get a mortgage, even if they were too poor to pay it back).

Re:Scam?

[koan]

"Bush's administration the number of regulations increased from 110,000 to 150,000 pages."

What kind of regulations? Where is your source information? Following your theory on a government caused collapse in the housing market meant they would have been complicit in removing the very regulations that prevented.

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

Re:Scam?

[cpu6502]

At work they block most of the web, so I cannot access my usual links (for sources). Sorry. But it's pretty obvious that the Housing Bubble was caused by mortgages that were too easy to get, and the reason they were too easy to get is because the Congress and also the HUD secretary dropped the minimum qualifications to almost nothing. Everyone could get a mortgage. That created the boom. (And booms are always followed by busts.)

Re:Scam?

[timeOday]

I disagree with you on the causes of the crisis. But that aside, how would crowdsourcing actually work? It is different than micro-loans, because you agree ahead of time exactly what your return will be. Hollywood is driven largely by royalty and profit-sharing agreements, and has become famous for legally screwing people out of what they thought they were entitled to. If I send somebody $5000 for a share in some new website, but they're the only ones who know how many shares they're selling and they alone decide how much "profit" they're making (because there are no independent audits of the finances), aren't I really just signing up for however much they decide later to let me have?

Re:Scam?

[cpu6502]

BTW if Glass-Steagall were still in effect, would it have prevented the housing bust in 2008? No. We'd still be in the same situation..... maybe a little better but not by much, because when you have a major market like housing collapse, there will be wide-ranging damage.

Oh and here's a link I just found that shows how Bush REGULATED, not deregulated:

http://reason.com/archives/2008/12/10/bushs-regulatory-kiss-off

Re:Scam?

[koan]

Read this all the way through.
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

Re:Scam?

[cpu6502]

I already did.

Listening to PBS is about as worthless as listening to FOX or CNN or Microsoft NBC (controlled by the defense corporations). The plain truth is that even if Glass-Steagall were still in effect, it would not have prevented the housing bust in 2008. We'd still be in the same situation..... maybe a little better but not by much, because when you have a major market like housing collapse, there will be wide-ranging damage.

Oh and here's a link I just found that shows how Bush REGULATED, not deregulated (as I said in my original post): http://reason.com/archives/2008/12/10/bushs-regulatory-kiss-off

Re:Scam?

[koan]

Those regulations were the pure unadulterated stupidity of the Bush family genes.
https://en.wikipedia.org/wiki/List_of_George_W._Bush_legislation_and_programs
That man was and is an abject failure at everything he does.

In regards to the Glass-Steagall act::

This article speaks of how Glass-Steagall limited the size of financial institutions and how the law does not apply in Europe, but it ignores the protection that it provided to our domestic banks and insurance companies. The biggest crisis was the collapse of our banks, not our investment bankers. Banks provide the life blood of our economy - liquidity. That liquidity is protected by the FDIC and the strict rules imposed on banking that prohibited banks from leveraging deposits with risky investments. Glass-Steagall prohibited investment bankers from accepting deposits. Gramm-Leach-Bilely Act of 1999, made significant changes to Glass-Steagall. The act repealed the Glass-Steagall Act's restrictions on bank and securities-firm affiliations. It also amended the Bank Holding Company Act to permit affiliations among financial services companies, including banks, securities firms and insurance companies. Thus the mergers of banks and financial institutions began in 1999 creating these monsters that grew too big to fail. Glass-Steagall may not have stopped a crisis, but it sure would have slowed it down and reduced the scope of damage. The article says that to prevent a future crisis financial institutions should be required keep a good chunk of loan obligations on their own books. I disagree because keeping loans on the books does not guarantee sound underwriting when non-deposit assets from non-banking services can be leveraged with riskier loans. Under Glass-Steagall, bank deposits must be protected with conservative investments which provides better assurance of good underwriting procedures. Likewise for life insurance companies that must maintain a large portfolio of investment grade debt instruments. In addition, the rating agencies themselves should be regulated and audited regularly by the SEC. The SEC should be overhauled to prevent its employees, especially its executive employees, from getting too cozy with Wall Street firms. Glass-Steagall should be re-enacted. Investment banking, banking and insurance should be segregated to adequately diversify the risks or our financial institutions.

Which makes the case for even stronger regulations and oversight.

Re:Scam?

[Anonymous Coward]

Glass-Steagall is only one portion of the puzzle. It is why we have high commodities prices right now.

It would cut the knees off of hedge funds. As they are playing the market both ways. Long bets and short 'safe' ones. The GS part would make going long a more calculated prospect. The money for the loans was 'created' using these very ideas. The money for the .com bust and housing one did not just magically appear...

They nearly put us under in 1997/1998. But the fed moved in and 'fixed it' fast enough that no one really noticed it. The next 2 people noticed.

GS was invented to take the sting out of the swings and make them smaller and not great depression style ones.

Re:Scam?

[cpu6502]

Oh I see. You're one of those who think Clinton and Obama are angels on earth. I suspected. In reality they are no better than the Republicans (puppets of their corporate funders). Especially Obama who I think is a pro-war, pro-corporatist neocon.

Re:Scam?

[datavirtue]

No, it was mandated loans AND the fruits of deregulation.

Re:Scam?

[del_diablo]

Good flamebait, he is not even adressing anything about the Democrats. He is merely stating the fact that Glass Steagall WORKED.
So stop being a angry troll and get some sunlight.

Re:Scam?

[del_diablo]

Mod up, its a good quote.

Re:Scam?

[Anonymous Coward]

Oh I see. You're one of those who think Clinton and Obama are angels on earth.

Nothing he said even remotely suggests such a thing. You did not get that impression at all, you made it up as a strawman position and pretended he advanced it. This makes you a liar.

Re:Scam?

[cowboy76Spain]

For what I read, very few of the loans were "mandated". Instead, there was a massive impulse to loan to anyone without proper checks, because in the end the banks were just going to sell the junk to other investors (assured by the AAA+ from rating companies that are still out there).

This article explain why people with no ability to repay the mortgage where granted one, not because mandated loans but because the mortgaging company got its benefit from firming and selling the loan (doing a risk analysis might mean that the loan was not granted --> less profits). Also in the CS Monitor I found an article (can't found it right now, I will be grateful if someone points a link) about workers in banks and mortgage agencies, relating how they were forced (by their bosses) to accept anything as a proof of the capability of the borrower to repay the loan. Those who tried to do things in a sane way were reprimanded because they did not met the quotas that the "insane" agents did met.

In one of the stories, someone did arrive with a picture of himself in front of a bussiness (IIRC it was a gardening one), claimed that this was proof that he owned the bussiness and demanded a loan. He got it.

Re:Scam?

[cowboy76Spain]

During George "duh" Bush's administration the number of regulations increased from 110,000 to 150,000 pages. The New York Times must be using a definition of the word "deregulation" that I am not familiar with, because I would call a ~50% increase in regulations the Exact Opposite of deregulation.

Without context, the figure is pointless. It is like claiming that my software is better than yours, because mine has 150000 LOC while yours only has 110000 LOC(*). Likewise, they could have heavily regulated certains practices that affected only to marginal parts of the economy and deregulated critical ones.

For what I read here and in other articles, private companies were pretty much happy with signing away untenable mortgages because they were just selling them away, without sharing the risk. This lead to a situation where doing such simple things as checking if the borrower had a stable income and how much it was in relation to the loan where "unwise", because it could lead to the mortgage not being allowed (which meant less money for the company who sold those loans to idio... investors because they got AAA+ from a rating firm).

When the government allows this (a company profitting from brokering deals and without any responsability, and an investor who does not know what he is buying), it will end always the same way. The only incognite is how much time it will take.

(*) No car analogy, sorry.

Re:Scam?

[TubeSteak]

but it is very clear to me the mortgage bubble was created by the Government, its Fannie/Freddie organizations, and the private bank monopoly known as the Fed. They colluded with one another to provide tons of cheap low-interest loans, and that fueled the rapid rise in demand for limited housing, and eventual burst of the bubble in 2007-8. If anything it was TOO MUCH regulation

Right. None of it had anything to do with the massive fraud the loan originators and derivatives bundlers were perpetuating.
Those fucks are so dishonest, they couldn't even forclose on the clusterfuck they created without robosigning their way to another massive fraud upon the people.

You have to be blind, deaf, and dumb to think "TOO MUCH regulation" is the reason those assholes lied their way to massive profits.
Seriously, how could you have ignored the endless reporting on what the banks and lenders were doing?

Re:Scam?

[s73v3r]

I was not aware that the poster, nor the NYT in any way said they were.

Re:Scam?

[s73v3r]

And I would say that someone who merely counts the number of pages has no idea what they're talking about.

I cannot comment of the dot-com or enron debacles, but it is very clear to me the mortgage bubble was created by the Government, its Fannie/Freddie organizations, and the private bank monopoly known as the Fed. They colluded with one another to provide tons of cheap low-interest loans, and that fueled the rapid rise in demand for limited housing, and eventual burst of the bubble in 2007-8. If anything it was TOO MUCH regulation (Congress insisting everyone should get a mortgage, even if they were too poor to pay it back).

False. The biggest factor was the repeal of Glass-Stegall(sp?), which made it far more possible for banks to be risky with money, including loans. And that IS deregulation.

Re:Scam?

[s73v3r]

I like how you are not able to actually counter his points, and so you have to resort to trolling.

Re:Scam?

[turkeyfish]

Obviously, you learned nothing about the economics of credit default swaps and why they were behind the financial meltdown. You just swallowed Wall Street's line that it was all those poor people conspiring against all those honest businessmen on Wall Street. Get ready to get fleeced, AGAIN.

Re:Scam?

[turkeyfish]

Had Glass-Steagall been in place one thing would have surely happened. Those at Morgan Stanley, Goldman Sach's, AIG and others would now be in jail having sold credit default swaps from their own accounts to the detriment of their customers. Indeed, it is unlikely there would even have been a market for credit default swaps as the act prohibited commerical banks acting like investment banks. My sense is that Americans still haven't learned anything about the financial meltdown of 2008 and bought the Wall Street line, hook, line and sinker. Only, when America makes the 3rd time the charm, will they finally begin to catch on.

Re:Scam?

[phlinn]

The repeal of Glass-Stegall, inasmuch as it affected the mortgage bubble at all, reduced the impact. The banks which took advantage of being able to diversify were the least effected by the crash. Which is what you would expect.

Crowdvesting

[Anonymous Coward]

I find your proposal interesting. With the resources that a large group of people can martial we can accomplish things that no individual alone could do. What could we call this group of like minded individuals, each seeking to invest funds for a share in the profits? I have it! We'll call it a corporation.

Regards,
Jason C. Wells

Re:Crowdvesting

[Anonymous Coward]

I find your proposal interesting. With the resources that a large group of people can martial we can accomplish things that no individual alone could do. What could we call this group of like minded individuals, each seeking to invest funds for a share in the profits? I have it! We'll call it a corporation.

Regards,
Jason C. Wells

Good Sir,

You are heretofore approximately two hundred and ninety five years postrelevant.

Sincerely,

John Law
Biloxi, Louisiana Colony
Ask me about how you can get your hands on some
gorgeous, ridiculously profitable swampland today!

JOBS Act!

[Anonymous Coward]

Catchy acronym! If you don't vote for the JOBS act, you are AGAINST CREATING JOBS. This therefore MUST pass.

Re:JOBS Act!

[Anonymous Coward]

Or are against resurrecting Steve JOBS with Ash2Life, the un-cremating cream, now in a convenient powder.

Outdated information

[TubeSteak]

http://news.cnet.com/8301-1001_3-57402589-92/jobs-act-clears-senate-one-step-from-becoming-law/

The JOBS Act has passed the Senate. In a 73 to 26 vote today, an amended version of H.R. 3606, which opens startup investing to individuals ("crowdfunding") and gives young companies more flexibility in filing to enter the public stock markets, cleared what is probably its last major hurdle before becoming law.

I'm really surprised that it passed the Senate as the JOBS act is chock full of poorly thought out deregulation.
It's so bad that the head of the SEC has come out against it and State securities regulators are against the bill

If this bill becomes law, it'll directly lead to the next wave of investor fraud.

Re:Outdated information

[Tanktalus]

To be fair, you may be talking about some of the people who best know the world of investment finance, but they also have a vested interest in opposing deregulation: it removes some of their power. They no longer have oversight over something, and that is generally a scary proposition for people in power.

This doesn't mean they're wrong, merely that you have to evaluate their statements in the context of their positions. As you should do for investment bankers who might be in favour of the change.

Re:Outdated information

[fishybell]

While I 100% agree that this is a formula for investor fraud, it does have some significant safe guards to prevent a people wiping out someone else's savings with a scam. From the NYTimes link provided in a previous post:

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

Investors with annual income or net worth of more than $100,000 could invest up to $100,000 or 10 percent of annual income, the Senate amendment states. The amendment also requires companies to disclose more financial results as they increase the amount of money they intend to raise.

Considering how many pump and dump stocks bilk people out on the stock market, with no caps on how much the company can earn or how much someone can invest, I think this is a slightly better alternative way to get scammed.

Re:Outdated information

[nnnnnnn]

How does regulation or the SEC protect you? How did it protect Madoff investors, or Enron Or Worldcom or Solyndra or WaMu or Lehman investors for that matter? All regulations do is make the barrier to entry so high that only the big companies get funded, while everyone else doesn't. If I want to invest in a garage tech company, how will regulations protect me? It won't. Regulation will only make compliance so expensive that garage tech companies will never get funding, only large companies will.

If a company is irresponsible and is loosing money and committing fraud, the government will be the last to know about it. Meanwhile, no one will do due diligence since everyone thinks the government is doing their job. We don't need a government nanny who don't understand the businesses they are nannying.

Re:Outdated information

[TubeSteak]

To be fair, you may be talking about some of the people who best know the world of investment finance, but they also have a vested interest in opposing deregulation: it removes some of their power. They no longer have oversight over something, and that is generally a scary proposition for people in power.

Those aren't the only organizations against the bill. The AARP even thinks it is a bad idea.
They don't want their rich old members getting fleeced because companies no longer have to release a prospectus whose contents are accountable to the SEC.
http://ourfinancialsecurity.org/blogs/wp-content/ourfinancialsecurity.org/uploads/2012/02/AARP-small-business-letter-FINAL.pdf (PDF)

Re:Outdated information

[s73v3r]

Wow, what a pile of shit. Not one thing in your post is remotely accurate. The only people who don't do due diligence on an investment are idiots who wouldn't do it anyway, even if there wasn't government regulation.

And there's very good reason for having these regulations, as history paints a very bleak picture of fraud and scams without them.

Re:Outdated information

[cayenne8]

Well, kinda like people that bought houses they couldn't afford with variable rates they didn't bother to read or learn about...or even ASK about...

Caveat Emptor......

Re:Outdated information

[turkeyfish]

There isn't anything in the bill that limits the number such investments one can make, only the amount invested in any one company. So it will be relatively easy to set up a company, without a prospectus fake the value of the company, and then pitch it to numerous "crowds". You get a few thousand of these and you have most investors fully invested, siphon the money off to some Bahamian bank account or a subsidiary investment in a long line of high priced hookers, and when these companies go down simultaneously, as they most certainly will, they take the entire economy with it, just like the credit default swap market did.

Re:Outdated information

[turkeyfish]

So I guess the thrust of your post is that our economy should be based entirely on fraud, since the same people that are pushing this are the same people so eager to ensure that the government is too small to do anything about it. Coincidence? I wouldn't bet on it.

Re:Outdated information

[nnnnnnn]

Can you give one example where regulations or the SEC have stopped fraud in its tracks? And before it was obvious to everyone on the planet?

While on the subject of piles of shit:

"I was astonished. They never even looked at my stock records. If investigators had checked with the Depository Trust Company, a central securities depository, it would've been easy for them to see. If you're looking at a Ponzi scheme, it's the first thing you do." Madoff said in the June 17, 2009, interview that SEC Chairman Mary Schapiro was a "dear friend," and SEC Commissioner Elisse Walter was a "terrific lady" whom he knew "pretty well." Since Madoff's arrest, the SEC has been criticized for its lack of financial expertise and lack of due diligence, despite having received complaints from Harry Markopolos and others for almost a decade. The SEC's Inspector General, H. David Kotz, found that since 1992, there were six botched investigations of Madoff by the SEC, either through incompetent staff work or neglecting allegations of financial experts and whistle-blowers.

Concerns about Madoff's business surfaced as early as 1999, when financial analyst Harry Markopolos informed the U.S. Securities and Exchange Commission (SEC) that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. According to Markopolos, he knew within five minutes that Madoff's numbers didn't add up, and it took four hours of failed attempts to replicate them to conclude Madoff was a fraud. He was ignored by the Boston SEC in 2000 and 2001, as well as by Meaghan Cheung at the New York SEC in 2005 and 2007 when he presented further evidence. He has since published a book, No One Would Listen, about the frustrating efforts he and his team made over a ten-year period to alert the government, the industry, and the press about the Madoff fraud.

This bill is a terrible idea

[AcidPenguin9873]

This bill reduces oversight, regulation, and investor protection measures when companies want to raise investment capital. Please read the following:

http://baselinescenario.com/2012/03/20/cfa-institute-against-the-jobs-bill/
http://baselinescenario.com/2012/03/21/jobs-disaster-looms/
http://baselinescenario.com/2012/03/22/last-ditch-attempt-to-save-a-little-bit-of-investor-protection-in-the-united-states/

One of the biggest cause of the recent financial crisis was too little regulation of the financial industry. I do *not* want to do it again in 5 years.

Re:This bill is a terrible idea

[Black Parrot]

One of the biggest cause of the recent financial crisis was too little regulation of the financial industry. I do *not* want to do it again in 5 years.

Don't worry... in 5 years we still won't be recovered enough for another crisis.

Re:This bill is a terrible idea

[jeffmeden]

This bill reduces oversight, regulation, and investor protection measures when companies want to raise investment capital. Please read the following:

http://baselinescenario.com/2012/03/20/cfa-institute-against-the-jobs-bill/

http://baselinescenario.com/2012/03/21/jobs-disaster-looms/

http://baselinescenario.com/2012/03/22/last-ditch-attempt-to-save-a-little-bit-of-investor-protection-in-the-united-states/

One of the biggest cause of the recent financial crisis was too little regulation of the financial industry. I do *not* want to do it again in 5 years.

The only crisis you don't want to have happen is the one you don't see coming... If this is as plain-faced as many out there think it is, what is the worry? Wait for the momentum to pick up, then bet big against crowd-vesting. Then, sit back and watch your millions roll in!

Re:This bill is a terrible idea

[MickyTheIdiot]

I happen to believe that the deregulation of the banks was A if not THE major cause of the collapse we saw in 2008, however the question isn't whether all regulation is bad or all regulation is good. That's the way the debate is framed in our rock-stupid political discourse and our current dumbass presidential campaign.

The *real* debate should be what regulation is appropriate in what situation. When you talk about over-regulation of small business most people have a good point. Small business can't bring down the economy and small businesses individually don't have much political power. When you talk about huge banks with millions of dollars tied up you have a different issue. They have huge power and they could hurt millions of customers.

It's always what is appropriate. If you believe set of ideas fits all situations then you aren't being realistic or you're a professional troll like Rush Limbaugh.

Re:This bill is a terrible idea

[Anonymous Coward]

All regulation KILLS JOBS. If you value your ability to feed your kids, you should oppose all regulation. Anyone who says anything different is trying to scam you.

Re:This bill is a terrible idea

[Anonymous Coward]

What deregulation?

The rate of growth of rules on the federal register has been positive even throughout the Bush administration. I dare anyone to try to prove otherwise by means of actually looking at this source, instead of using the tedious talking points about deregulation. The truth is regulations have increased in a greater than linear fashion, even in the financial sector of the economy.

Re:This bill is a terrible idea

[Anonymous Coward]

AC due to mod points.
I assume you don't work in finance.

I say this because regulation has nearly CRIPPLED our ability to grow as a small business.

The securities agencies don't have enough funding or manpower to enforce most of their regulation. THAT is what caused the meltdowns, NOT a lack of regulation.

Re:This bill is a terrible idea

[Anonymous Coward]

Hey guys,
This is easily the best bill to pass Congress in years. Assuming it clears all hurdles it will probably singlehandedly help revitalize the US and world economy.

It's not the 1920s anymore. Investors at the bottom don't need "investor protection" anymore. Oh my god, the entrepreneur wants my money...PROTECT ME!!! The head of the SEC is just crying about losing some turf. They (SEC) have no credibility anyway. Go read any Matt Taibbi story for chrissake, all the big guys (Goldman Sachs, Bank of America, MF Global, AIG,etc etc) are constantly getting away with everything and the SEC does little but hand them a wiping towel after the country gets pounded in the ass. The cross pollination of employees between SEC and Wall Street (eg. senior SEC execs going to Wall Street) doesn't help either.

This is an incredibly good policy and it's essential that it gets passed to help improve US competitiveness.

Re:This bill is a terrible idea

[s73v3r]

That's an awful fucking answer. For one, you don't know if this guy is rich enough to do so. Odds are he isn't. Second, if he's not, even if he can see it coming a mile away, that doesn't mean he isn't going to be fucked over by it just the same.

Re:This bill is a terrible idea

[s73v3r]

Anyone who claims that regulation kills jobs and is a scam is trying to get you to let them scam you.

Re:This bill is a terrible idea

[s73v3r]

Small business might not be able to bring down the economy, however, many small businesses together might be able to. Remember the dot-com bubble?

Re:This bill is a terrible idea

[s73v3r]

And I dare you to prove it is so using the actual meat of the rules, rather than just the number of them. If 2,000 rules were added that don't really affect anything, and 3 rules were removed that were huge parts of regulation, what was the net effect?

Re:This bill is a terrible idea

[Anonymous Coward]

Actually it was over-regulation that caused the problem, but if you only pay attention to the mainstream media talking points of 'the federal government allowed the banks to give out sub-prime loans' you forget that the federal government ENCOURAGED these loans in order to 'put more money into the hands of the taxpayers.' Shame that it was all fake money we were getting, hence the burst of the bubble.... then the government intervenes and bails these banks out.

Seriously, do some research before you complain.

Re:This bill is a terrible idea

[turkeyfish]

"Don't worry... in 5 years we still won't be recovered enough for another crisis."

Don't worry. This will assure that we never will recover as most investments will prove to be little more than pump and dump scams targeted at mobs of overeager investors ready to get rich quick. After all, they may read a prospectus, but they surely don't understand it, so not having one won't alter their behavior, except of course when their investments collapse and they loose what little wealth they have. Why so many Americans think its no big deal if most of their fellow citizens go broke is beyond me.

On the bright side, the Chinese government won't have to wasted so much money trying to hack into our corporate and defense establishments to weaken us. They will simply be able to sit back and watch us do that all by ourselves.

Re:This bill is a terrible idea

[turkeyfish]

and no regulations just kill people instead.

Re:This bill is a terrible idea

[turkeyfish]

Obviously, you never really understood the credit default swap market and why the lack of regulation of this market proved disastrous, so I guess you are doomed to repeat a similar mistake.

Re:This bill is a terrible idea

[turkeyfish]

Subprime loans were only a part of the problem. A much larger problem was the creation of the credit default swap market that went entirely unregulated and led directly to the insolvency of nearly every major financial corporation, until we taxpayers bailed them out, crippling our economy in the process.

Crowdfunding will not work.

[Anonymous Coward]

Crowdfunding is a great way for criminals to launder huge sums of money and scammers to attract investment money for schemes.

Re:Crowdfunding will not work.

[ZeroSumHappiness]

So you're saying it'll be successful? (Remember, laundered money is taxed money.)

How does venture capitalism work then?

[amigabill]

If the average joe is not allowed to get investment in his company, then how do companies with wealthy venture capital investors work? What's the difference?

Re:How does venture capitalism work then?

[ZeroSumHappiness]

How to get rich in four easy steps:
1. Start off rich
2. Invest your money wisely
3: ???
4. Profit

Wealthy investors can invest without regulation (or at least, limited regulations) because the SEC assumes that wealthy people know how to handle their money.

Re:How does venture capitalism work then?

[Voogru]

I guess people havent figured out that this is really a scam which enables the already rich to profit even more because they don't have to share the profits with the lower classes.

Of course, if they sold it like that, they couldn't vote for it. So it's instead sold as "We're going to protect you from scammers by making it impossible for you to invest in small startup companies! Don't worry, we'll invest in them and keep all of the rewards for ourselves."

You just keep buying those CD's now.

Remember folks, the laws are created to protect the rich and powerful. Not for the common individual.

Re:How does venture capitalism work then?

[TimHunter]

Now we know better. Ask Alan Greenspan:

Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity — myself especially — are in a state of shocked disbelief.

http://www.independent.co.uk/news/business/analysis-and-features/quotes-of-2008-we-are-in-a-state-of-shocked-disbelief-1220057.html

Re:How does venture capitalism work then?

[jeffmeden]

If the average joe is not allowed to get investment in his company, then how do companies with wealthy venture capital investors work? What's the difference?

There is a small flock of lawyers on either side of the table figuring out how to avoid having their side get (overtly) screwed in the deal, by way of very specific ownership contracts. Since it's not practical to have a lawyer sitting next to the computer everywhere a crowd-vesting purchase is about to be made (it will be a purchase of a share of the profits, not a donation like we currently see with crowdsourcing) it does not seem practical to let "just anyone" solicit funds for ventures of questionable merit on the internet. How will we expect everyday people to be able to tell the difference between a real and fake small t-shirt company on the coast of Louisiana that just needs a few grand to get off the ground with a great idea (that they cant share for fear of being copied)? It's hard enough telling the difference between the real and fake Nigerian Princes out there...

Re:How does venture capitalism work then?

[Rude Turnip]

You're allowed to sell stock or debt in your company as long as you are able to meet certain reporting standards, such that it is harder to rip-off investors. This lowers the bar for disclosure and makes it easier to scam people.

Re:How does venture capitalism work then?

[MickyTheIdiot]

Greenspan was in disbelief because he was a blind follower of a bankrupt philosophy.

One of the many major problems of Objectivism is that power corrupts. People won't always act rationally and they will steamroll people just because they can.

Re:How does venture capitalism work then?

[Anonymous Coward]

Show me a single time when Greenspan acted out the tenets of Objectivism. Don't cite words that could be simply tossed out while acting the opposite, cite actions, please. I suspect you will have a hard time of it, given his actions were that of a central planner, a leech and a tool of statists.

Also, as a simple deductive counter argument to your claim, statism provides more opportunity for 'steamrolling' than the non aggression principle ever could. The power of freedom of association and mutually voluntary exchange is not to 'steamroll' people. That is an exclusive domain of violence.

Thus, the only bankrupt philosophy is the one employed that has indeed bankrupted us. To suggest that it is Objectivism that is driving our current decline would be to admit ignorance of what Objectivism asserts. The overriding economic philosophy pushing us nearer to ruin is economic fascism(corporatism for those who like definitions that put emphasis on the effect of the problem, rather than the source). I challenge you to demonstrate otherwise.

Re:How does venture capitalism work then?

[s73v3r]

Yup. And I'm sure it has absolutely nothing to do with scams of this very nature that were an epidemic on the country around the 1920s and 1930s.

Re:How does venture capitalism work then?

[s73v3r]

People won't act rationally simply because they are people. There are numerous psychological hangups and attachments that get in the way of us making purely rational decisions. And these hangups have been studied exhaustively, so that many of the rich are able to exploit them.

Re:How does venture capitalism work then?

[s73v3r]

statism provides more opportunity for 'steamrolling' than the non aggression principle ever could.

What 'non-aggression' principle? You completely missed his point. Those who can will steamroll over people just because they can, whether they be in private industry or not, and whether they have government support or not.

The power of freedom of association and mutually voluntary exchange is not to 'steamroll' people. That is an exclusive domain of violence.

Are you honestly trying to say that the rich and powerful will not fuck people over simply because they can? If so, then you're clearly not an Objectivist, you're a retard.

Re:How does venture capitalism work then?

[__aaltlg1547]

Nothing. If you have money to invest, you can invest it. This bill is about removing some of the laws that make fraud harder.

ah, very good

[Anonymous Coward]

...allow the common citizen to invest for potential profit...

They're going to legalize online gambling after all.

Re:ah, very good

[MickyTheIdiot]

It's already legalized. It's called Credit Default Swaps.

And it will NEVER be abused

[Anonymous Coward]

This is a big victory for MONEY LAUNDERING! (not to mention graft and prostitution)

Re:And it will NEVER be abused

[Voogru]

Prostitution should be legal anyway.

Re:And it will NEVER be abused

[T.E.D.]

It is, if you spell it "L O B B Y I N G"

Re:And it will NEVER be abused

[turkeyfish]

I fully agree. Its just that I would prefer to hire them myself, rather than see my investments used to hire them for someone else, which is precisely what is going to happen to a very large fraction of crowdsourced "investments".

Newsflash

[Voogru]

The whole point of investment is to risk your capital in order for a return. If you can't afford to lose it, you should not be investing it in the first place. That is the risk you are taking. However if your investment takes off, you will have a very high return. So if you lose $10,000 in ten different 'investments', and then some of your next $10,000 investments take off and become the next home depot, you're still way ahead of the game.

These laws that prevent people from investing in small startups ends up hurting them, because now what happens is all of the expansion happens and then they finally create an IPO and there is not as much growth for them to profit from. How many IPO's have you seen under 50 million dollars?

Very few.

If you want risk free money, get a CD and enjoy the negative returns.

Re:Newsflash

[s73v3r]

Say whatever you want; the reporting requirements for offering stock are NOT a bad thing.

Sweet

[Anonymous Coward]

I've been authorized to lease out the Brooklyn Bridge, and fund the first viable cellousic ethanol plant in the Cayman Islands. If your capital needs to be put to better use, I'll take real good care of it.

For a minute I thought I might have to change

[Anonymous Coward]

For a minute I thought I might have to change one of my investment rules:

Good investments don't advertise.

There are some exceptions of course, such as good CD rates advertised by banks. Good businesses may also occasionaly advertise an issue of shares in the WSJ. In general the rule applies to things that you never heard of before that are being advertised as investments. The classic example is the "high yield investments" you see in local pulp newspapers and ad flyers. It's not unusual for these to end badly. They're most likely junk bonds being sold outside the usual chanels.

In general these "crowdsourced" investment offerings will come from people who got turned down by VCs or couldn't get VC money. Think about that. If you had enough money you might be able to diversify your crowdsourced investments and come out ahead. That's assuming that the typical crowdsource funded startup does well. I'm willing to wager (by not wagering) that the typical crowdsourced startup does worse than the traditional angel/VC startup.

Yes. You will hear some success stories. It's just like the lottery parading their winner on camera, or the Indian casino running the commercial with the smiling $100k winner at their slots. Averages, people. Averages. That's what matters.

Sounds like an awful idea

[cdrguru]

The idea that someone can become an investor - and start thinking they are going to have input into the operation of their investment - without having any knowledge of what they are investing in is a sure road to disaster.

Unfortunately, the disaster isn't just for stupid investor that puts some money into something relatively blindly and then regrets it. Oh no, if it was just that the limits on how much money might be OK. No, the trouble starts when J.B. Moneybags shows up on the doorstep of what he invested in and thinks (ignoring all statements to the contrary) he should have some input now. Of course, if the guy really had lots of money to invest he would have done things sensibly (maybe). But what you are looking at is a guy who wants to get in on the ground floor of something and is sure he knows more about running the business than the people who started it.

Oh, and of course if you don't listen to him he will sue. Might take a while to find a lawyer that will take the case, but he will end up suing. Which will eat up every bit of whatever he invested in legal fees and court time. And probably a lot more money than he invested to go along with it.

No, if you haven't had a investor you probably do not understand. But anyone with a past or present investor knows exactly what this is about and wants nothing to do with it at all. Some people are going to get burned by this - the investors that deserve it and the start-up guys that do not.

high risk with money you can afford to lose

[peter303]

Prior to this bill you could only invest VC money beyond a million dollars you have saved. It presumed you could afford to lose money over a million dollars.

Re:high risk with money you can afford to lose

[Applekid]

Prior to this bill you could only invest VC money beyond a million dollars you have saved. It presumed you could afford to lose money over a million dollars.

As a non-millionaire, I find it really odd that loaning money to start a business is not legal. No wonder class mobility has ground to a halt, when only the wealthy can invest in ways to make more money beyond the mere catching up with inflation the middle and lower classes engage in.

investing in a private company is illegal

[peter303]

Not crowdsourcing, Because many startups and private companies do not publish full annual financial reports, the SEC figures you could get screwed by lack of information.

Ordinary Americans Shouldn't be Allowed to Invest

[sp3d2orbit]

Until Americans get much, much better at basic mathematics and risk management in general, it is foolish to allow the average person to invest in a venture capital manner -- and history is a guide as too why.

During the years 2000 - 2007 millions upon millions of Americans took out first, second, and third mortgages to invest in real estate -- a tangible product that historically is a good investment. They all signed loan documents containing something called "The Truth in Lending Act" disclosure that says in very clear, very understandable terms "You are being loaned money at 1-2%. Your interest rate can eventually increase to 7-8%. This loan may cost you WAY more than you can ever afford to repay." Everyone who signed a loan document during those years saw that document, saw the possibility that they could get screwed, and said "I'm going to get rich".

When the bottom of the market fell out people didn't blame themselves for ignoring the Truth in Lending Act disclosure. They didn't blame themselves for ignoring the mathematics behind interest rates and monthly payments. They didn't blame themselves for not having money management skills and avoiding overextending themselves. Instead they blamed the bankers and society in general. Way easier.

If the average person is allowed to invest in venture capital schemes then a lot of them are going to lose their asses because most businesses don't work out. Until we live in a society where it is no longer OK to say things like "I just don't understand math" then it is not OK to allow those same people to risk their savings on long shot gambles. Because, as we have already seen, society will inevitably have to bail those same people out when things go bad.

otherwise called the "FACEBOOK" bill

[peter303]

Plenty of small investors were angry they cant invest in Facebook until it is fully public. This bill is a way around that.

I smell a bubble

[NicknamesAreStupid]

It smells sweet, looks beautiful, and floats effortlessly, too. Bounteously round and enticingly transparent, it seems to be the perfect investment vehicle. That means many people will follow it mindlessly and pour billions in until the bubble bursts into flames and crashes. God Bless America!

Re:Ordinary Americans Shouldn't be Allowed to Inve

[AvitarX]

The only people I know that did that, did blame themselves (I know 3).

The reason the banks got blame is that they made lots and lots of these loans, knowing people would not be able to pay them back if they didn't get rich. The banks allowed themselves to get taken down too, which damaged far far more people than simply the ones being stupid.

The banks could have stopped it, a single borrower could not. The situation for any individual borrower is their fault, but the fact that lending dried up over-all and the economy dipped hard is the fault of the banks.

A Threat to the Banksters

[jr0dy]

I am sure there are some pretty powerful lobby dollars out there fighting against this, as banks will definitely want to maintain barriers to entry to the lending market.

why on earth would this stall ?

[Anonymous Coward]

This is when you use the Idiocracy tag, not on evolution.

LendingClub - can already do this in many states

[witherstaff]

LendingClub, a peer 2 peer investment firm, was a Forbes 2011 most promising company. For people who have invested about 20K, 100% have not lost any money. Basically it allows people to get loans that are graded A-F, better grade, lower interest. Then you can buy into a loan from $25 - $5k. Once enough people fund the loan it goes active. Average loan is 11K for debt consolidation, average return is 6%. Not bad. They also have done over 1/2 a billion in loans.

I'm not part of the company, I was just investigating a good investment for some excess money and dug into them. Sadly, this is not usable for me since I'm in a state it is not allowed - Michigan. However there is also a secondary market for trading already bought loans and that is workable, not as nice, but a possibility.

I can see why only about 1/2 the states allow this, the banks have to be fighting to stop this very hard. Borrowers can gets loans for half of what banks want to change, investors can be one step away from their investments, it's a nice setup. But it goes against the golden rule - he who has the gold makes the rules.

is it crowd or cow sourcing,mooo

[Anonymous Coward]

is it crowd or cow sourcing,mooo

Wrong JOBS Act, wrong target

[sethstorm]

If they want to make it pass, add the provisions from the bill that made long-term unemployed a protected class - like the identically named but worker-individual friendly predecessor.

Adding the crowdsourcing provision is only a distraction when the problem rests with businesses throwing every roadblock to hiring.

The Poor Are Not Included

[turkeyfish]

The poor are not included as investors as there is almost no way to defraud the poor out of money they don't have. This is meant to scam those who do.

It is amazing that as all have watched money be poured into speculation and seen it largely disappear, people still want to give their money away. Well at least all those Wall Street boiler rooms and scam shops will be back in business.

You don't understand kickstarter.

[Anonymous Coward]

Kickstarter is NOT about donations! Stop spreading that bullshit! Kickstarter is about raising capital from customers who are willing to pay you in advance so you can then use your new capital to produce the item or service they want to sell! NOTHING TO DO WITH DONATIONS OR CHARITY.

Sign me up!

[__aaltlg1547]

I'm just thrilled at the possibility that I could get in on the ground floor with somebody's great investment opportunity. I'll wire all my money to Nigeria right away.

Facebook

[Anonymous Coward]

If you let more people invest outside the stockmarket then sure, more people will get scammed. That is not a reason not to do it. It would be like saying "if you let people buy a house more people will get their houses robbed", if overall the world is a better place, then focus on catching the robbers,not stopping people buying a house.

Small scale investment is a GOOD thing, it DOES create jobs.

As for the SEC's opinion, they allowed Facebook to sell shares without proper accounts via the Goldman Sachs issue, so their position is *inconsistent*. SEC investigated Bernie Madoff and found his Ponzi scheme clean, so even in their field of expertise (which isn't job creation or small businesses) they are *incompetent*. Thus I don't put any weight behind the SEC's opinion because the SEC is more often wrong than right.

"If this bill becomes law, it'll directly lead to the next wave of investor fraud."

And the next wave of job creation too. So go catch the fraudsters to maximize the jobs per fraudster ratio. Oh, and don't let the SEC do that investigation, if they couldn't spot a $50 billion ponzi scheme they can't spot at $50k ponzi scheme.

Bill names

[slasho81]

I love how all the bill names in the US are named in a way that if you vote against them it sounds like you're a dick. "Senator X voted against JOBS!"

Let people make better choices

[SuperKendall]

The reason it has always been so difficult for small business to get start funds up is because historically 9 out of 10 go fucking belly up, only 1 in 10 survive.

But that's because banks are really bad at judging which ideas have merit. There are lots of businesses they do NOT fund that might have worked.

The new law is great because it lets ideas that have real merit get money that might not have from a bank. This is especially important for technical endeavors where a bank simply cannot understand if a good idea makes sense.

Will some people loose money from this? Yes of course. But far MORE important is that many ideas will now be able to proceed that could not get capital before - and even the failures can provide us with information about ideas that do not work, and in the meantime provided flow of capital in running that business until it fails.

This legislation is far more helpful than not.

oh noes?!?!

[jduhls]

Crowdsourcing bypasses banks and wealthy investment companies?!?! They'll go out of business?!?!? What will we ever do without their insight into what's worth investing in?!?!? The banks a necessary to help prevent another recession...oh...wait..they caused it.