Fiscal Affairs: "JOBS" Disaster Looms

The House "JOBS" bill is a thinly disguised repeal of investor protection in the United States. This legislation would help unscrupulous people in the securities industry, but it would be bad for nonfinancial businesses -- by raising the risks to investors, it would push up the cost of capital for honest entrepreneurs. Investment professionals belonging to the CFA Institute have expressed their serious concerns and strong opposition. Attempts to amend this legislation -- and to make it more sensible -- failed in the Senate yesterday.

The Senate will vote today on whether to adopt the main provisions of the House bill. Passing this bill would be a major public policy mistake -- akin to the disastrous (and bipartisan) deregulation of the financial sector in the 1990s. This kind of excessive deregulation leads to disaster -- and to fiscal crisis. (For more background and the historical comparison, see this piece.)

President Obama claims he wants strong investor protection. Where is he on the specifics of the JOBS bill? Why is the White House staying so much on the sidelines during this critical Senate process? The president should rally Democratic Senators against the House bill and press again for an amended and more responsible piece of legislation.

If the Republicans refuse to agree to sensible investor protections -- flying in the face of American tradition and established best practice (and lessons learned the hard way in the Great Depression) -- that is a great issue for the general election in November.

Simon Johnson is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You, available from April 3rd. This post is cross-posted from The Baseline Scenario.

 

 

 

Follow Simon Johnson on Twitter: www.twitter.com/baselinescene

Comments

[AvgJoeBlow]

06:52 AM on 03/22/2012

What a greater coup for WallStreet than to put into law the "Pump and Dump", staple of their flim-flam for decades now. Anyone who keeps the majority of their investments in Stocks or ETF's who is not an insider, full time investor, or member of the top 5% is insane. How many 401k's are back to 2008 levels?

[kelpal]

04:14 AM on 03/22/2012

President Obama lets his opposition hang themselves. He has done this numerous times in the past 3 1/2 years. He just lets them spout nonsense without engaging. Then he gets at least part of what he and the people who voted for him want during very partisan times that have been unlike any I have ever seen. The Republicans look the worst they ever have. Get out and vote for Obama and for the people who are not trying to screw you, weasel you out of medicare and social security, of pollution controls that save people's health, out of woman's health rights, collective bargaining rights, out of clean water and air and are trying to keep the rich the richest in the world - no tax increases for them. Obama did what he could do in the smartest way possible and got us out of the worst financial situations since the great depression - caused by Bush, et al. The GOP tried and is trying in every way to make President Obama look bad no matter how much it may hurt the American people. That is why they have such a low approval rating. Obama does not have unilateral powers and because of that he has not lived up to the expectations of the left, whom I am one of, but also I am practical and realistic. Hopefully the next 4 years will give him more leeway to pursue things he has always wanted for this country.

[Life With HC]

06:28 AM on 03/22/2012

Why is Obama supporting the JOBS Act?

[AvgJoeBlow]

06:56 AM on 03/22/2012

Unfathomable to me, he continues to listen to those Wall Street, hand in your pocket, revolving door cabinet members he should have fired long ago. They are not the smartest guys in the room, and even after TARP continue to tear our country down.

[OleProfessor]

11:45 PM on 03/21/2012

Obama leads from the rear...

Really far rear...if these fights were football he wouldn't even be hanging out in the parking lot...let alone on the field..

Obama is a bankster himself as the record shows..

Of course I'll vote for him again because the Republicans are worse..that's Obama's secret weapon..he can stink all he wants we still have to vote for him because no matter how bad he is on domestic economic issues the Republican Cult is even worse..

[greyhound2]

07:20 AM on 03/22/2012

Don't you get tired of the same old "lesser of two evils" every four years?

[OleProfessor]

12:21 PM on 03/22/2012

Yes I am really sick of it...really disappointed but that's America today..

[zogimperator]

11:07 PM on 03/21/2012

This bill really will precipitate a catastrophic wave of white-collar Wall Street crime -- only it won't be crime, because this bill makes it legal.

Look up the details. It's a nightmare litany of the worst ideas imaginable, and if it passes we will see another Great Depression as sure as the sun rises.

Mr. Obama is making a terrible mistake not speaking out about this. It reinforces the general discontent with voters concerning his love of Wall Street.

[LizBankster]

10:14 PM on 03/21/2012

Jobs Act could remove investor protections, SEC chair Mary Schapiro warns http://www.washingtonpost.com/business/economy/jobs-act-could-open-a-door-to-investment-fraud-sec-chief-says/2012/03/14/gIQA1vx1BS_story.html. It can be safely concluded that there is nothing new nor surprising from a bribed Congress; just another example of self-serving political cretons. Obamacare is also worried about his reelection so he can write about his place in history thus wanting that pseudo jobs bill signed a.s.s.a.p.

[dumuzi]

09:31 PM on 03/21/2012

When is Obama going to step up and tell the senate to "cut the crap"? My wife and I supported him during the last presidential election and we will probably support him again (the alternative is unthinkable). But his unwillingness to play hardball with even the members of his own party is not very presidential. He needs to forget the overdone niceties of senatorial collegiality and take a stand against all this deceptive nonsense. If he wants "strong investor protection" he should just spell it out. He's not in law school anymore.

[Life With HC]

06:30 AM on 03/22/2012

Obama is supporting this weakining of investor protections. Please explain why this is good.

[dumuzi]

11:38 AM on 03/22/2012

My point is this.The White House seems to be standing on the side lines while the Senate plays their usual games. Obama must state without any kind of reservation and demand strong investor protections and stop the collegiality foolishness he picked up as a senator.

[Life With HC]

08:53 PM on 03/21/2012

Obama supports this bill. Why is he siding with the Republicans?

[rgray222]

08:19 PM on 03/21/2012

All we need is the president to do even just a little bit of what he promised and this will come under control. He has had no budget in more than 3 years that is disgraceful. He said he would cut $450B out of medicaid and medicare to pay for healthcare and now he and every liberal like yourself scream foul when someone actually wants to do exactly what the president said he would do.
Obama counted that $450B twice to pay for healthcare and he has no plans to cut anything. That is more than $1T of lies with our money. Absolute shame on him and yourself for writing such a dishonest biased piece. Democrats need to simply do what they say they are going to do and stop the blame game!!

[habajebe]

10:54 PM on 03/21/2012

Can't put much stock in your post when you claim that twice $450B is more than $1Trillion. Got a calculator?

[Ruyur]

10:30 AM on 03/22/2012

She should learn what 'base 8' means and switch the settings to 'base 10'.

[zogimperator]

11:08 PM on 03/21/2012

Are you high?

[BigBearcatBill]

08:05 PM on 03/21/2012

Republicans don't listen to Snobs though professor, you have to much education for them and must be too liberal because of that.

[Life With HC]

08:47 PM on 03/21/2012

Why isn't Obama listening to the professor? Obama called for the Senate to pass it in its House form, you know. Do you feel better now knowing Obama supports it?

[DougDeWitt]

07:56 PM on 03/21/2012

They're all guessing... and stupidly.

The solution is so simple, a single line-item in the US tax code, and will create 7 million jobs in the first year, make every American family healthier than we have ever been in our history, and create a surge in consumer spending that will kickstart both the manufacturing sector, and the housing industry, while reducing the US long-term deficit by more than $36 Trillion...

Sound impossible? See for yourself... then you do the math: http://americanprogressive.org/2011/08/28/a-social-capitalist-approach-to-health-care-delivery/

[PatrickforO]

09:11 PM on 03/21/2012

The approach outlined in this link might work. I have often said that since the fiduciary responsibility of officers in a publicly held insurance company is to make money for shareholders, the economic incentive for them is to deny all claims if possible. This plan seems to create incentive to pay claims. I think it might be a bit fuzzy around the edges but its a start. Healthcare is in fact a basic right of all Americans, or should be.

[NAMI]

10:27 PM on 03/21/2012

DougDeWitt

It does sound too much ................but thanks for the link i just saw it and it makes me hope.
faved
a single line-item in the US Tax code ??? what is it ?

[aflevine]

07:21 PM on 03/21/2012

Lacking an organization that will punish the President for making a bad decision or reward him for making one that is good, we can expect exactly what we've seen for 30+ years. Any other perspective is silly. We need an organization like the AFL-CIO that has broader focus than manufacturing that can act as an counterbalance to the myriad organizations representing moneyed interests.

Ranting, however well intentioned, doesn't help.

[Bayard Waterbury]

07:07 PM on 03/21/2012

Yes, folks, we are getting “jobbed” and not in any good sense. But, gee, go figure. This is the thing that the waterboys in the Senate and House do for their allstars in the 1%. They carry the water. They fertilize the garden of scams with ever more methods to use. It is all a part of plutocratic everyday living in Third World America. It’s certainly no worse than selling toll roads, or parking meters, or sewer systems to the scammers. Whatever it takes to destroy the average American is what they do. You could argue that they don’t do so intentionally. But those who suffer death from accidental shootings are still dead. And most happen because of legally owned firearms. It’s not bad enough that the financial lobby machine is working massively to neuter the already weak Dodd-Frank effort at financial reform by watering down the subsequent rule making. Now the Congress in intent on passing laws (like Congress being exempt from insider trading rules and in many other ways) which legalize scamming. Deregulation is simply not enough. Funding their excesses through Bernanke’s massive QEII giveaways is insufficient, Underfunding every necessary regulatory program and agency is simply not totally useful. Now they want to memorialize scamming, so that when small investors lose every penny by trying to play with the big boys, those scammers can’t be convicted of any kind of fraud. This bill simply makes it all legal. When will it all stop? I’m not optimistic.

[trishlee2]

07:01 PM on 03/21/2012

Our representatives are elected to support the interests of the people, regardless of whether or not the people understand the language or projected outcome of a certain legislation. It is the representatives responsibility to understand it and vote accordingly, to always protect the common good. How the language deceives the people can be explained to the people when the good Senator casts his/her vote.

[splashy]

06:11 PM on 03/21/2012

We don't need any more "deregulation" which means throwing us to the wolves.

[Life With HC]

08:48 PM on 03/21/2012

Obama supports this. Why is that?

[Dimshao]

05:08 PM on 03/21/2012

If, indeed, House "JOBS" bill is a disguised repeal of investor protection, and if this legislation would help greedy people in the securities industry, then it would be bad for all other businesses -- by raising risk to investors, and raising cost of capital for honest entrepreneurs. They just want to pump up the appearance of a recovering economy, even though this may crash the economy and jobs after the election. It is all about power and greed, as usual.