In praise of crowdfunding

[ProSense]

In praise of crowdfunding

The JOBS Act is getting slammed as a sellout to Wall Street. But it's not all bad

By Andrew Leonard

Judging by the left’s response to the passage of the JOBS Act last week, the United States is now once again safe for fraud, Wall Street shenanigans, and old-school ’90s style dot-com flim-flam. The basic take is that the bill signed into law by President Obama on April 5 proves that we’ve learned nothing since reckless financial “innovation” plunged the world into a massive recession. Instead of tightening the screws, we’re loosening them. A bill that is supposed to make it easier for startups to get funded and grow (and create jobs) is actually just an invitation for Big Capital to be as reckless as they wanna be.

The critique may well hold true for large deregulatory swathes of the new law — it didn’t generate massive Republican support for nothing, after all. But there’s one piece that’s getting unfairly castigated and it just happens to be something that could have enormous progressive potential. It’s the piece called “crowdfunding”: the Internet-enabled aggregation of lots of small sums of cash as way to raise capital for individuals or enterprises who would otherwise face an uphill battle getting the attention of banks or well-heeled investors.

The democratization of Wall Street could be a very good thing, especially if you’re looking for ways to invest your capital in local businesses that you value and want to succeed. The basic principle is not so hard to understand. New technological innovations can offer new ways of doing things. Last November, in my article “A Declaration of Independence from Wall Street,” I quoted the Federal Reserve Bank of San Francisco’s Ian Galloway as he painted an enticing picture of the not-too-distant crowdfunding future.

“I can imagine a world not too far down the road,” says Galloway, “where you can walk down the street and pass a blighted piece of property, take a photo of it with your smartphone, click your CDFI (Community Development Financial Institution) app and have that photo geo-coded and sent to the local CDFI with your $25 investment in the predevelopment loan that would cause that property to be redeveloped.”

Sounds nice, no? But there was one major obstacle preventing the realization of that scenario. Securities regulations dating all the way back to the 1930s made it very difficult for anyone but the wealthiest Americans to invest in private companies and prevented online crowdfunding facilitators from offering any kind return on one’s investment — unless they jumped through an expensive series of regulatory hoops. Popular crowdfunding pioneers like Kiva and Kickstarter make do with donations, not investments.

- more -

http://www.salon.com/2012/04/09/in_praise_of_crowdfunding/

This was the Merkley amendment, which was supported by all but one Democrat, Senator Webb.
http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=112&session=2&vote=00054

Merkley: Crowdfunding Exciting New Opportunity for Small Businesses and Startups

Merkley Crowdfunding Amendment Included in Bill Signed By President Obama Today
April 5, 2012

Washington, DC – Oregon’s Senator Jeff Merkley issued the following statement after President Obama signed into law the “JOBS” Act, which includes an amendment he sponsored to provide for crowdfunding. The crowdfunding amendment, cosponsored by Senators Michael Bennet (D-CO) and Scott Brown (R-MA), allows small businesses and startups to raise capital online, while instituting strong protections for investors:

“I am very pleased that my crowdfunding amendment is now law. Crowdfunding opens up exciting new opportunities for small businesses and startups across America to raise capital from investors online. The potential is enormous. Entrepreneurs, who previously had to rely on capital from angel investors, will now be able to receive small seed investments from a larger group of investors to create new companies and jobs.

“Exciting new opportunities usually come with risks, and crowdfunding is no exception. The original House version of the bill paved a path to predatory schemes. It required no information to be presented, and if startups put forth information, there was no requirement of accuracy. The balanced approach we put forth with investor protections will provide a strong foundation for success.”

http://www.merkley.senate.gov/newsroom/press/release/?id=3EDA2A41-A636-4F64-89A9-96FABF492A82

[Scurrilous]

1. K & R

[whatchamacallit]

2. So by posting this, it can be inferred you agree with

this statement: "The critique may well hold true for large deregulatory swathes of the new law — it didn’t generate massive Republican support for nothing, after all."

Good to know.

[ProSense]

4. Actually,

So by posting this, it can be inferred you agree with

this statement: "The critique may well hold true for large deregulatory swathes of the new law — it didn’t generate massive Republican support for nothing, after all."

Good to know.

...I don't support that at all (http://www.democraticunderground.com/1002540367), and if you read the entire article it presents other arguments.

[girl gone mad]

3. Good grief.

Now you're openly cheering for more looting of what's left of the middle class by these crooks.

Pathetic.

[ProSense]

5. Well,

Good grief.

Now you're openly cheering for more looting of what's left of the middle class by these crooks.

Pathetic.

...I expect more nonsense from you. Typical.

[trumad]

6. You do know that Andrew Leonard and Taibbi are at war...

with Taibbi usually kicking his ass.

[ProSense]

7. Thanks

You do know that Andrew Leonard and Taibbi are at war...

with Taibbi usually kicking his ass.

...for letting me know, but that has nothing to do with the OP or the point. In fact, I doubt Senator Merkley and the other Democrats who supported his legislation considered that feud.

[Egalitarian Thug]

8. Of course it's not all bad, you can't run a confidence scheme without some

bait to bring the suckers in.