If Washington Wants To Create Jobs, It Should Get Out Of The Way In Silicon Valley

from the lead,-follow-or-get-out-of-the-way dept

It's already quite clear that Sarbanes-Oxley has done very little to actually prevent fraud of any kind, but it has been a tremendous burden, especially on smaller, innovative companies that help grow the economy and create new jobs. It's basically become a huge tax on tapping into public financial markets for growth. Michael S. Malone is now making the argument that if the incoming presidential administration is serious about creating jobs, it's time to roll back SarbOx and other accounting rules that have acted more for theatrical purposes rather than any legitimate reason. Basically, all they've done is create new reporting requirements that do little to nothing to either prevent fraud or clarify a company's actual financial position (its intended purpose). Regulators love these sorts of bogus rules because it makes it look like they've done something, when really all they've done is put up huge hurdles for actually doing anything. I'm all for radical transparency in financial info, but that's not what has been done. Instead, we've made it burdensome to actually grow a company -- and that doesn't help create jobs. It helps kill them.
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Filed Under: economic growth, jobs, sarbanes oxley

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  1. identicon
    Chris Coles, 24 Dec 2008 @ 3:19am

    If Washington Wants To Create Jobs, It Should Get Out Of The Way In Silicon Valley ??

    This is a much deeper problem than simply a matter of access to IPO's and while the Grant Thornton paper http://www.grantthornton.com/staticfiles/GTCom/files/GT%20Thinking/IPO%20white%20paper/Why%20are%20I POs%20in%20the%20ICU_11_19.pdf has merit, it only represents the problem from their particular viewpoint. The overall problem has been a complete lack of understanding of the underlying problem right at the grass roots of society where there is no access to capital at all. None, of any sort. The result has been a failure to recognise that, while everything seemed to be on track through the 1990's, instead the numbers of new companies was drying up due to there not being any source of available capital taking a long term viewpoint alongside a complete failure to recognise that there had been in progress a long term collapse in manufacturing; which was by then reaching its zenith. You lost countless thousands of privately owned companies while fewer and fewer were being formed BELOW your observable horizon.

    At the same time, everyone stopped thinking about the effect of placing almost all the capital, (savings?), of the nation into the hands of Institutional Investors that were by then, through a variety of regulatory measures, now totally constrained from investment into the grass roots of society. The reality of everyone focusing upon the IPO resulted in no one recognising that there is a desperate need for perhaps several tens of thousands of sub IPO company formations to be adequately capitalised from the savings of the nation. I first set out my thinking to The Governor of The Bank of England, Eddie George in 1994 and recently posted this as a proposal for what I call a capital Spillway Trust here. http://www.chriscoles.com/page3.html

    Venture capital was, is, totally focused upon a tiny fragment of the capital needs of any nation but falls short of the needs of a fully free enterprise nation. That process, Venture Capitalism, is not, in my humble opinion, free market based and as such is doomed to failure over the long term as more and more new ventures reject the VC route to available capital on offer. (What, you have not noticed?). But there is no other route to available capital as it is all mostly now in the hands of Institutional Investors that have no retained function for the long term capitalisation of the new, grass roots company. THAT is the underlying reason for the fall off in the IPO marketplace. I have tried my best to illuminate the debate here on iTulip. http://www.itulip.com/forums/showthread.php?t=5166

    You do not have any savings, or classic "Savings Institutions", or a recognised long term strategy to capitalise your capitalist free enterprise nation; particularly at the grass roots of society. What you have instead created is a feudal mercantile economy that has now failed. The IPO problem is merely a single symptom of the overall problem that must now be addressed if the Western Capitalist system is to continue to prosper. You have to return to good old fashioned Capitalism and relearn how to create new, free enterprise companies at the grass roots of society; that inevitably lie well beneath your present horizon, but surely not beneath your dignity?

    Chris Coles

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