Congress Clueless About Venture Capital... Still Wants To Regulate It
from the this-makes-no-sense dept
Following the financial crisis there's obviously a lot of interest in more carefully regulating aspects of the private equity markets, given that behind-the-scenes financial efforts have been seen (rightly or wrongly) as part of the cause of the mess. But, of course, Congress can barely understand what caused the problem, let alone other aspects of the the financial system, so they end up regulating by shooting in the dark. The latest is that the various attempts to put regulations on hedge funds and private equity firms that invest in public companies (which in many cases really were sneaky ways to get around regulations) may be applied to venture capitalists as well, despite the fact that venture capital is a totally different beast. It doesn't invest in public companies. It doesn't aim for sneaky quick flips. It's true long term investment capital, directly investing in private startup companies to help them grow. It's real investment -- not gambling. But Congress doesn't seem to realize that.In a recent Congressional hearing where venture capitalist Trevor Loy explained this to our elected officials, Senator Jim Bunning of Kentucky apparently told Loy that he didn't believe him that VCs invest in private companies rather than companies likely to be rated by the various ratings agencies (I'd link to the story where this was noted, but the publication that wrote it, put it behind a paywall and apparently doesn't want traffic -- there's a Google cache for now). And, yet, these are the folks writing the regulations. This is why some of us get nervous about gov't regulations. Yes, in an ideal world, perfectly knowledgeable regulators might possibly be able to divinely create regulations that work. But that's not what we have.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: jim bunning, regulations, venture capital
Reader Comments
Subscribe: RSS
View by: Time | Thread
It's dangerous
Frankly, if a congressman called me up before congress and called me a liar, I'd feel the need to push back (that's why I'm not getting the big bucks, I suppose).
[ link to this | view in chronology ]
Draw the distinction too tight and the true enture capitalist is hamstrung, make it too loose and it becomes a loophole for everyone else.
[ link to this | view in chronology ]
Government Dangers
[ link to this | view in chronology ]
I guess they want to eliminate the middle class...
Next, bail out only the large banks, causing all the small banks to be swallowed up by the large guys.
Then, put such massive regulations on VCs that nobody will even bother to try to invest in the small guys anyway.
Time to welcome our corporate, fascist government...
[ link to this | view in chronology ]
VCs play a role in taking nothing, and creating something. New companies, new ideas, new products, new shareholder wealth. I'm not saying it's all their doing, and plenty of founders are unhappy about sharing their equity. But there is a system for launching businesses here in Silicon Valley that just doesn't exist at this scale anywhere else in the world, and VCs are a big part of it.
There are plenty of things that are "broke" and need fixing. If the gov't made a prioritized list of things to fix, VCs would not be on the first few pages.
[ link to this | view in chronology ]
http://en.wikipedia.org/wiki/Jim_Bunning
And consider the source. It's pretty scary just how many important committees this obvious underachiever is on.
[ link to this | view in chronology ]