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JOBS Act Passes Cloture, Some Investor Protection Amendments to Get Post-Cloture Vote

The Senate invoked cloture today on the JOBS Act, the financial deregulation bill that Reid pulled from the floor yesterday after the failure of some amendments that would strengthen the investor protections. The vote was 76-22, with all the no votes coming from Democrats, including (surprisingly) New York’s Kirsten Gillibrand, who must be representing the buy side today while Chuck Schumer represents the sell side. Good for her.

Despite this fairly broad opposition from Democrats, the bill is primed for passage. However, Majority Leader Harry Reid has found a way to get some more investor protections, which he prefers, into the bill. After invoking cloture, Reid filed two additional germane amendments to the bill. One, from Sen. Jeff Merkley and others, would regulate “crowdfunding,” the attempt to allow companies to raise capital online from small investors. It aims to protect those investors from fraud. The other, from Sen. Jack Reed, would restore disclosure agreements for IPOs that would have been thrown out in this bill.

The trick is that Reid will force votes on these post-cloture. And he has ensured that these would require a simple majority rather than 60 votes. Given how amendments went yesterday, it would appear that these amendments have majority support. That means, after final passage, the bill would not go to the President. Either the House or the Senate would have to act on the other’s bill, or else form a conference committee, to finish work.

Regardless of this, and while I think these two anti-fraud amendments are important, it still begs the question of why this bill is getting its day in Congress in the first place. There is no compelling need to rip up decades of securities laws, as if this would unlock capital formation and lead to a fountain of jobs. The bill mostly would lead to more bucket shops and boiler rooms and bilking of investors and savers. Even Obama’s head of the SEC opposes the bill as little more than an invitation to fraud.

Felix Salmon seems to have forgotten who owns the place in his objection to the deal:

There’s no good reason at all for this: it’s basically a way for unpopular incumbent lawmakers who voted for Dodd-Frank to try to weasel their way back into the big banks’ good graces and thereby open a campaign-finance spigot they desperately need.

I don’t fully understand the political dynamics here. A bill which was essentially drafted by a small group of bankers and financiers has managed to get itself widespread bipartisan support, even as it rolls back decades of investor protections. That wouldn’t have been possible a couple of years ago, and I’m unclear what has changed.

Nothing has changed. Dodd-Frank was an anomaly, and really only a rhetorical anomaly. The banks knew that they could strangle the bill in implementation and set out to put as few binding restrictions on themselves as possible. And they largely succeeded with that. Congress, as Salmon rightly points out, is captured by the finance lobby. The very existence of the “JOBS Act” proves that.

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David Dayen

David Dayen