Video: Why is the SEC delaying a bipartisan effort to encourage capital investment?

posted at 11:21 am on December 14, 2012 by Ed Morrissey

Republicans and Democrats didn’t agree on much in 2012, but one point of bipartisanship on the economy was the JOBS Act.  Part of the bill encourages “crowdsourcing” capital fundraising for projects, along the same line as Kickstarter, which focuses efforts on the arts.  It requires action from the Securities and Exchange Commission to write rules allowing the reforms to be put into place, but the House Oversight Committee reports that SEC chair Mary Schapiro has dragged her heels in complying with this bill.  Why?  They argue that Shapiro is more concerned with her “legacy” than in boosting job creation:

It has been revealed that Chairman Schapiro unilaterally pushed back against the job creation provisions in the bipartisan law because of the influence of a lobbyist and the concern over her own “legacy.”  The continued restricts critical access to capital for American small businesses, slowing economic growth, hiring, and the creation of new jobs.

“Congress passed this bill – President Obama signed it into law – What’s more important: American entrepreneurs and getting this economy moving again, or a lobbyist and the legacy of one individual?” said Chairman McHenry in the video.

Read the SEC emails here.

Read Chairman McHenry’s letter here.

Be sure to read the e-mails.  The video does seem to take the “legacy” comment a bit out of context, as Schapiro seems to be arguing that she doesn’t want to be seen as unnecessarily blocking or delaying the rule.  The e-mails, which Oversight to their credit produce in full context, show that the issue here was whether to have a full comment period on the rule change, or whether to shorten the period because, as SEC Commissioner Daniel Gallagher argued, “we know what the comments will be.”

On the other hand, look at the dates on these e-mails.  They’re from August, more than four months ago, and almost four months after Obama signed the JOBS Act.  Even at that stage, Gallagher declared in his e-mail to Schapiro that “I am furious” over the delay in getting a proposal for the rule change.  By this time, the e-mail chain was three months old, and Gallagher had had enough:

I just got word about the latest change to general solicitation. It is not acceptable. I have been operating in good faith, reviewing the multiple proposals sent to me for consideration this month, and I continue to find shifting sands. A “proposal” on general solicitation could have been done months ago, and indeed should have been done years ago. Meredith and Lona made it crystal clear to me on Monday that there is no need for a proposal because we know what the comments will be.  And so, I spent hours working on how to accommodate your desire for a study within an interim final rule, and we did so — just to find out now that you have changed your mind again.

Against the backdrop of a potential open meeting on money market funds that may be just an exercise of you “getting us on the record” as you told me two weeks ago and as was reported in the WSJ today, I can only assume that you have no desire to proceed in food faith as we consider critically important rules in an unreasonable schedule you have set for this month. I will proceed accordingly.

Four months after that missive, Oversight wants to know why no action has yet to be taken on crowdsourcing rules.  Seems like a pretty good question, and one Schapiro should be answering in Congress.

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The most transparent administration evah.

Ward Cleaver on December 14, 2012 at 11:24 AM

crowd sourcing capital for projects?


tom daschle concerned on December 14, 2012 at 11:28 AM

Hey – since the #1 and #2 football teams in the country are both from the SEC, sounds to me like a good place to invest.

Oh, wait, what? Not that SEC? My mistake……

dentarthurdent on December 14, 2012 at 11:30 AM

Another narcissistic monkey-person in a powerful government position? Wow, that’s really someth zzzzzzzzzzzzzzzzzzzzzzzzzzz

Bishop on December 14, 2012 at 11:30 AM

She’s a socialist, is she not? Why would she want capitalism to function?

Don’t expect congress to do anything about this, unless this will put money in someone’s pocketses.

dogsoldier on December 14, 2012 at 11:31 AM

I’m sure it’s all because of a youtube video.

UltimateBob on December 14, 2012 at 11:34 AM

dentarthurdent on December 14, 2012 at 11:30 AM

Ooops – my mistake – They were #2 and #3. I guess they haven’t knocked of Notre Dame yet…..

dentarthurdent on December 14, 2012 at 11:35 AM

…these people could phuck up a wet dream just laying there!

KOOLAID2 on December 14, 2012 at 11:36 AM

Why is the SEC delaying a bipartisan effort to encourage capital investment?

Because Erick Holder is reading the Permanent records of all the investors in question.

SWalker on December 14, 2012 at 11:43 AM

Her legacy? As if anyone knows or wants to know who the he!! she is. Does Obama know about this ego, he may not like the competition.

Cindy Munford on December 14, 2012 at 11:52 AM

Like the Professor often says: it’s about control.

apostic on December 14, 2012 at 11:53 AM

I thought we tried this unregulated investment stuff before. They were trying to put poor people in homes last time. Now job creation is the goal.

Since the Dems love to blame president bush and Wall Street for the last mess, I love to quote such people as Mayor Bloomberg:

” It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.” Bloomberg’s sage comments to Occupy Wall Street 12/1/2011

This is selling investments to crowds not Wachovia and not German Banks or huge funds.

What could go wrong?

BTW, Bloomberg was very kind to me and my late wife when we looked at a nice black and white car he was selling. Maybe he has his faults but he is good to (irritating poor) people.

IlikedAUH2O on December 14, 2012 at 12:15 PM

Obama’s Washington. Filled with these officious incompetents.

pat on December 14, 2012 at 12:16 PM

I am a minority. I would feel like garbage if I got tax money or investor money and lost it. I would feel awful if I ripped off President Obama, even if I was a large donor.

I am speaking against my own interest. Maybe, just maybe, I could use this. I would rather stay without funds than see the whole economy ripped off, though.

Anyway, when you look at things like this remember the Sheperds or whatever their name was, who were harpooned on SNL. What was it? They made 11 Billion on 24 Billion in bad loans to Wachovia? I am speaking from memory. bad memories in memory, in fact.

I think it is Rule 506 that is the latest free pass for developers and promoters to fleece the sheepie.

I would rather have a regulator worried about the long run.

Our leader should have this woman looking at the green industry before they get taxpayer money or guarantees.

IlikedAUH2O on December 14, 2012 at 12:25 PM

Obama’s Washington. Filled with these officious incompetents.

pat on December 14, 2012 at 12:16 PM

Obama is not a leader. On top of that, he is a narcissistic demagogue. Therefore, there is no way he will appoint anyone who could be a threat to his “superior knowledge” on any and every subject. Thus, we should not be surprised that he has staffed his regime with incompetents and boobs. There will be no one in his regime more competent than he is. Given the fact that he really is not that competent at anything other than getting elected (and that required the full and complete complicit cooperation of every arm of the US Main Stream Media), it follows that nobody in the Obama regime will be either competent nor all that intelligent.

Real leaders look for the best and brightest, even if those people are better at some things than the leader. Leaders don’t feel threatened by this, but have the ability to bring the strengths of those people they hire to excel at what they attempt. We don’t have one of those as President.

AZfederalist on December 14, 2012 at 12:28 PM

Yes, have you not heard about this, yet?

I believe it’s already legal as per the law. However, SEC has yet to define some of the limitations on it – which means that anyone doing it is kinda at risk of violating securities laws.

blink on December 14, 2012 at 11:39 AM

no I haven’t heard of it until now. I apologize for not holding all knowledge.

seems like an interesting approach to raising private capital in our social media age, but the government is likely to ruin it by the time the rules get set. we no longer have free markets and rule of law. so whatever.

tom daschle concerned on December 14, 2012 at 12:38 PM

This isn’t a black-and-white, or red versus blue, issue. There are fears about the loosening of securities laws and disclosure rules. I don’t know enough about the specifics to say how well-founded those fears are, and whether they overwhelm the arguments for the proposal. But given the history of fraud by fly-by-nighters, you don’t have to be a socialist to be concerned when an initiative eases securities rules.

bobs1196 on December 14, 2012 at 12:50 PM

There was a very interesting article in The Atlantic a few weeks ago about the first attempt at a crowdsourcing of capital for redevelopment of a small commercial building in Washington, DC. The local developers were determined to break the mold and allow people who live in redeveloping neighborhoods to both invest some of their own funds into their neighborhoods and to have some control over what the redevelopment looks like. At present, in neighborhoods like this there are numerous vacant and blighted small buildings, which the big developers won’t tocuh because there is no profit in them. But the project is often too big for an individual such as a restaurateur to take on. So these buildings sit vacant.

The developers went to the SEC several times, hired a very expensive law firm (they actualyl had trouble finding a law firm because most were not interested in taking on the SEC) and paid for the legal work out of their own pockets. It took them 6 months of wrangling and they had to turn in over 1200 pages of documentation and disclosures, copied 6 times.

From what I understand, current SEC rules require that only “certified investors” may invest in a piece of a commercial property. This law is intened to prevent swindlers from selling 100% of a property to unwitting individuals. But it also prevents projects like the one in DC from getting off the gorund. As a result, what you see in cities like DC is huge redevelopment projects that usually end up being high-end condos and office buildings that all look the same and do nothing for the neighborhood, and they are built by big developers that get their capital from professional investors in places like New York and California.

If Mary Schapiro is dragging her feet on this rule that would lossen these strict requirements for investors, it is probably becasue she is terrified of some people down the road making bad investments in crowdsourced projects and getting ripped off. This is something that certainly could be abused, but the existing law has had very bad unintended consequences.

rockmom on December 14, 2012 at 12:50 PM

Let’s crowdsource a conservative development bank for media acquisition.

petefrt on December 14, 2012 at 2:58 PM

The order from Congress ought to be:


landlines on December 14, 2012 at 8:27 PM


that you have no desire to proceed in food faith as we

err, food should either be corrected or at least have a ‘sic’ somewhere.

2) She’s a scumbag.

auspatriotman on December 15, 2012 at 12:29 AM