Matt Taibbi Fuels Controversy Over Obama JOBS Act

President Obama signed the JOBS Act into law last week, but there continues to be controversy over it. The "Jumpstart Our Business Startups” Act includes measures that are supposed to help small businesses and startups grow, but it may end up hurting them.

Rolling Stone's Matt Taibbi just published a piece entitled, "Why Obama's JOBS Act Couldn't Suck Worse." He argues that this may encourage more financial scams. 

"In fact, one could say this law is not just a sweeping piece of deregulation that will have an increase in securities fraud as an accidental, ancillary consequence. No, this law actually appears to have been specifically written to encourage fraud in the stock markets."

Taibbi highlights a lot of bad components of the bill. For example, it exempts startups from independent accounting requirements for 5 years, gets rid of certain rules on financial disclosure and investor protection, and reduces rules that prevent analysts from talking up stocks in order to fool investors. Apparently, the Act is a grab-bag of favors for big financial firms and special interests.

It sounds like a disaster waiting to happen. Taibbi continues:

"There's just no benefit that the JOBS Act brings to an honest startup company. In fact, it puts an honest company at a severe disadvantage, because now it has to compete against other, less scrupulous companies that can simply make their projections up on the backs of envelopes."

Although the JOBS Act was intended to help startups, certain provisions directly get in their way. It prohibits entrepreneurs from raising funds using crowdsourcing, in particular. Tim Carney expands on this point in the Washington Examiner. In this way, the JOBS Act restricts the number of options that entrepreneurs have in raising funds for their new business. Instead, they have to turn to angel investors, financial planners, or investment firms. 

Whatever this is, it isn’t reform.