On Wednesday morning, the Senate voted to advance the Republicans' JOBS Act by a margin of 76 to 22, one of the final steps the bill must take before being presented to (and potentially signed by) President Obama.
Earlier this week, the bill stalled in the Sentate as Democratics tried to add provisions to the bill that would strengthen protections for investors. And despite today's vote, the JOBS Act may still face more hurdles.
According to Politico.com, Democrats are intent on adding two more amendments that will improve protections for investors, before the bill is carried off to Obama.
"I want everyone to know, the bill is imperfect and perhaps that is an understatement," Senate Majority Leader Harry Reid said.
On Tuesday evening, for instance, the Senate denied the democratic proposal to the JOBS Act, 55 to 44, five votes short of a necessary majority, delaying the ultimate vote until Wednesday.
"The U.S. Senate on Tuesday defeated a Democratic proposal to water-down a "jobs" bill that would lift an array of corporate governance and accounting requirements on companies in the hope that they hire more workers," noted Dow Jones writer Andrew Ackerman.
Earlier this month, the JOBS Act, which seeks to create jobs by making it easier for start-ups to raise funding, and for larger companies to file for IPO, breezed through the House with a vote of 390 to 23. But Democrats were critical of the bill, arguing that relaxed laws on crowdfunding and angel investing would open the door to investor fraud.
Several Democratic congresspeople, in addition to the Securities and Exchange Commission Chairman Mary Schapiro, added a number of provisions to the bill, leading Republicans in the Senate to argue the bill was too watered-down to pass.
The bill, until recently, had drawn an overwhelming amount of bipartisan support from both congressional and business leaders. (In case you haven't been following the play-by-play, the bill was introduced in the House on December 8, passed by the House on March 8, and entered the Senate yesterday.)
In late February, for instance, a reporter for The New York Times, Jonathan Weisman, described the bipartisanship of the House as "the closest thing to a kumbaya moment Congress has seen for a while."
But the bill now stands on the floor of the Senate—with potential delays—as Democratic opponents of the bill are trying to increase provisions that would protect investors and shareholders.
Last week, Mary Schapiro, the chair of the Securities and Exchange Commission, added her own suspicions to the bill. In a public letter sent to the Senate, Schapiro warned legislators that a loosely-worded crowdfunding portion of the bill could open the floodgates to fraud and deception.
"Too often, investors are the target of fraudulent schemes disguised as investment opportunities," Schapiro wrote. "As you know, if the balance is tipped to the point where investors are not confident that there are appropriate protections, investors will lose confidence in our markets, and capital formation will ultimately be made more difficult and expensive."
Last week, the White House released its own tepid support of the bill, saying "The president strongly supports the efforts of Senate Democrats to find common ground by supporting the most effective aspects of the House bill to increase capital formation for growing businesses, while also improving the House bill to ensure there are sufficient safeguards to prevent abuse and protect investors."
Lawyers, too, are skeptical of the bill. Columbia Law School Professor John Coffee has called the bill's crowd-funding component the "boiler room legalization act" because it allows pretty much anyone, from online start-ups to brick-in-wall entrepreneurs with no proven track record the ability to raise cash.
Former New York Governor Eliot Spitzer called the bill "Orwellian." And Arthur Levitt, chairman of the Securities and Exchange Commission under President Bill Clinton, told the San Francisco Chronicle, "The bill is a disgrace."
"Under the guise of creating jobs, the House bill would make it easier for companies to raise money from the public without fulfilling some - or in certain cases virtually all - of the obligations designed to protect investors in public companies," the newspaper noted. "However, there is no requirement or guarantee that companies would use any of the money to hire a single person."
There's another issue that critics are growing increasingly skeptical of: Will the JOBS Act actually create jobs? Some say no.
"There's another fundamental problem with the JOBS Act," writes Barbara Roper, one of the bills' most outspoken critics. "There is absolutely no reason to believe that it will produce any new jobs...the disappearance of small company IPOs in recent years is the result of a variety of factors that have nothing to do with the regulations targeted by the legislation and that the legislation, if adopted, will not change."
In other words, the bill may face an uphill battle in the Senate, where legislators are expected to vote today or tomorrow.
Across the divide, supporters of the bill are adamant that the legislation will bring substantive change to entrepreneurs and small business owners.
"Crowdfunding and the JOBS Act need to pass so we can get capital to our nation's job creators," says Woodie Neiss, founder of Startup Exemption, an organization that helped develop the crowdfunding structure.
"This important piece of legislation addresses the startup and seed-funding gap that was left after the financial meltdown of 2008," he says. "It will allow the community to step in and fund fraud-free entrepreneurs and small businesses. Main Street will be able to evaluate becoming investors in our nation's neighborhood shops or the next great startups and will also share in that prosperity."
Spencer Bachus, a Republican congressman from Alabama and the chairman of the House Financial Services Committee, has been one of the most vocal supporters of the bill.
"Since the start of the 112th Congress, the Financial Services Committee has been a leader in advancing ideas that will jumpstart our economy and create jobs," Bachus said in a statement.
"The bills that make up the legislative package announced today came out of our committee with strong bipartisan support. They will empower small businesses and entrepreneurs to invest, hire, and expand. They will help put Americans back to work," the statement read. "Once we get the JOBS Act through the House, it will once again be up to the Senate to decide whether to join us in helping small businesses create jobs or continue to stand by and do nothing."
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