Tag Archives: White House

Obama Goes All Firefighter.

As much as I would like to write about all of the other crazy things that are going on, the European banking thing is the gift that keeps on giving.

Now of course, the Obama administration is stepping up efforts to push Europe to deal with this debt crisis, so that he won’t have to just 5 months prior to the election. Actually, what he is trying to avoid is dealing with the pressures on the US banking system as they build to a crescendo more like 3 months prior to the election.

If the clowns in the Romney camp had any brains, they would be building a huge media plan focused on “How Obama got us into this mess.”

So, hoping to avoid a similar disaster to 2008, the administration is holding private meetings, urging officials in the 17-nation euro zone to take swifter action to calm markets, reassure depositors about their banks’ health, and prevent some of Europe’s largest countries from suffocating under high borrowing costs and weak economic growth.

They think that the lessons learned from the 2008 financial crisis includes acting quickly and decisively to stabilize the financial system and prevent investor panic.

As an example, the administration wants Europe to use the continent’s rescue fund— now around €700 billion ($866 billion)—to provide assistance to governments struggling with soaring borrowing costs. Allowing the rescue fund to directly recapitalize banks, instead of forcing the struggling governments to borrow first from the rescue fund, would help prevent bank failures and enable the banks to continue lending, which would help support economic growth, the officials believe. Under this approach, the governments wouldn’t have to boost their own debt loads by borrowing from the fund.

How this works, by the way, is that the U.S. yells directly at the International Monetary Fund, in which it is the largest shareholder. The IMF has been urging Europe to use the rescue fund for that purpose, but the idea is opposed by Germany because they rightfully fear they will be left holding a huge bag of defaults.

The administration has also pushed Europe to build a larger rescue fund, or so-called firewall, believing a bigger war chest would ease investors’ concerns about governments beyond long-troubled Greece. But, that won’t work this time as investors are now much more cynical than they were in 2007, and they no longer trust governments to get their bailouts right.

And, to further complicate the situation, (as we have faithfully reported here) risks are rising that the financial turbulence in Spain—Europe’s fourth-largest economy—could deepen even before Greek voters go to the polls in two weeks to decide their fate in the currency union.

On Wednesday, Mr. Obama and leaders from Germany, France and Italy held an hour-long videoconference to discuss the euro-zone crisis, following up on a meeting of the Group of Eight major advanced economies hosted by the White House just one week ago.

These meetings were planned before Spain’s borrowing costs shot up this week. But they underscored the administration’s rising worry about how the euro-zone crisis could drag down the weak U.S. recovery for the third straight spring.

In a Gallup poll released Thursday, 71% of Americans said they are at least somewhat concerned about the effect of the European financial crisis, but only 16% said they understood the danger to the US markets . The data suggested worries could rise as the troubles weighed on U.S. markets and gained more attention in the U.S. Among the 16% of people who said they are paying very close attention to the news about Europe’s financial situation, 95% said they are concerned. Unfortunately, that still means only 15% of the US population is concerned about this very serious and impossibly huge disaster waiting just off-shore.

What those 15% fear is that a cascading crisis across the European banking system, triggered by Spain, or Greece, or another unseen banking revelation, could cross the Atlantic and hit the U.S. financial system. As we said in a prior post, we have a $39 billion KNOWN exposure to the European banks. Almost any result imaginable will translate into less business investment and hiring and less bank lending, triggering yet another, and deeper recession.

I love him, but this one will belong exclusively to Obama. Better act NOW.


Get A Job. Sha-na-na-na. Sha-na-na-na-NA.

The weak job numbers are there for a reason: There are NO jobs!

And when I go back to the house
I hear the woman’s mouth
Preaching and a crying,
Tell me that I’m lying ’bout a job

For the second month in a row, there are no jobs. This unsettles both the White House and Wall Street. Why? I don’t know. It would appear they both live in this fantasy world where everything will be all right again just as soon as this economy gets going. Well, guess what? The economy has been going for months and still there is no job growth.

The reason for that is best illustrated by this fact: In 1950, it took 30,000 people to produce 5 million tons of steel. Today, it takes 5,000 people to produce 7.5 million tons of steel. Which part of that doesn’t Wall Street and the White House get?

The numbers are just stupid. More gist for the fantasy mill. In April, employment grew by just 115,000. That followed a disappointing job gain in March. Together, the March and April average was only about half the 250,000 jobs added monthly in December, January and February. Half of a WHOLE QUARTER.

The real reason: “For the last couple of months we have a situation where the unemployment rate is still declining, but that’s because people are leaving the workforce,” says Gary Burtless, a labor economist at the Brookings Institution. He says it’s usually good news when the unemployment rate drops, because lots of people are getting hired, but that wasn’t the case in April.

Some people might have left the workforce because they reached retirement age, and it’s possible they weren’t replaced by young people, who may have decided to stay in school because the job market is still dicey. Or, because WE DON”T NEED PEOPLE TO DO THOSE JOBS ANYMORE!

“I’ve been feeling very dejected and depressed,” says one woman who has stopped looking for work. She’s 61 years old and she kept being told that “Someone else was getting chosen because they fit the culture better and I recently realized that that was code for I’m older and it doesn’t fit the image that they want to project,” she says. My shocked face goes here.

“It was somewhat humiliating and very depressing,” she says. “It was a shock to realize this isn’t working, because I tend to push on and push through and last week when I just decided to stop, it was an emotional change for me. I realized I have just given up.”

Repeat this story about 500,000 times and you have today’s job market. Here’s the nasty combo:

  1. Workforce is in their 50’s and 60’s – nobody wants to hire – benefits too costly – undesired optics – businesses want young and vital, not old and tired
  2. Skilled jobs are now automated – factory as well as service force
  3. Competition for unskilled jobs is from workforce in their 20’s – mostly college degreed job seekers willing to trade down through the job types
  4. Only turnover in public sector jobs are pensioners with contracts too expensive to replace
  5. Same story in private sector union jobs – no replacement workers
  6. Housing market stalled for like, … ever, depressing related construction, engineering, architectural, building supply, manual labor and maintenance jobs
  7. No credit for small to medium business, so no business expansion jobs
  8. Austerity, coupled with high gas prices subtracts spending on tourism, so no seasonal  tourist industry jobs
  9. Home grown austerity measures focused on discretionary spending, so no restaurant, entertainment, upgrade on existing appliance, auto, home improvement related service sector jobs
  10. Even Microsoft, who used to create 6 service sector jobs in and around Redmond for every employee hired, now creates only 1, as employee benefits are substantially reduced

All of those jobs that we fantasize about are simply never going to come back. That’s why people have stopped looking. The “people stop looking for work” bubble is huge and growing. As Paul Krugman said yesterday, unless we can kick this economy into a much higher gear and forget all about the negatives related to unemployment and the workforce and austerity, we are on a path to become the Greece of the New World.

Of course, my solution is always around initiatives like Crowdfunding and Startup University, which have the greatest chance of creating NEW employment of anything we have done so far. But, the Obama White House still hasn’t called. 

Crowdfunding Update!

This is a letter from the three guys at Startup Exemption, by the names of Sherwood Neiss, Jason Best, and Zak Cassady-Dorion, re-printed here with their permission, providing a status update on the Crowdfunding bill that Obama signed last week.

Thanks to these guys primarily, Steve Case (in the background) and many other individuals and groups, this legislation got through Congress in an amazing and relatively short period of time. You are also invited to participate in this process to insure that the bill gets implemented as planned. Enjoy!

President Obama signed Crowdfunding into law as part of the JOBS Act on April 5th. We did it!  It was an amazing experience to be at the White House and watch the President sign into law an idea we had to update the security laws.  To make it legal for entrepreneurs to use the Internet and Social Media to access funds from their friends and family to launch businesses and create jobs to help get us out of the recession.

This is a story about putting a stake in the ground, sticking to policy and out of politics, showing up and being present, being tenacious and never giving up.  It is a story about 3 entrepreneurs who were naive enough to think that just because they had a solution to the funding void facing startups and small businesses that they could actually change deeply entrenched 80 year-old security laws.  And when changing a law takes between 5 and 10 years, to have done it in 15 months, we’ve been told, is quite an accomplishment!

The reality is, we had good timing, a good story (it helps when entrepreneurs and not lobbyists show up to tell it), great teamwork and a true bipartisan desire to make a difference.  There were many people to thank along the way.  We’ve put together this list of folks that played an early and important role.  Without these people, we never would have made it to law.  They are Democrats and Republicans, politicians and staffers, businessmen and women, small and big business, authors, security lawyers and experts, entertainers, advocates, students and reporters.  But most importantly they are believers in what makes our country so great … Entrepreneurs.

What’s next?

While CrowdFund Investing might be signed into law, it won’t go into effect until 2013.  That’s because the SEC has 270 days to make the rules around which the legislation will operate in daily life.  We continue to play an active role in this process. A letter from a group of 13 top equity and debt crowdfunding platforms and industry experts was sent to the President the day of the bill signing.  In it we reiterate our desire to develop a transparent marketplace for crowdfunding where investor confidence is our number one priority.  The President acknowledged this group in his comments.

This group has quickly grown in size (100+) and at a meeting in New York City on April 18th formally organized around a Statement of Intent.  The group has chosen leaders which we endorsed to run this next leg of the race.  The group also formed a trade association (The Crowdfunding Global Professional Association, CFGPA) which will represent the voice of the industry, advocacy and education for both investors and entrepreneurs.  Another group (The Crowdfund Intermediary Regulatory Association, CFIRA) will focus on working with the SEC and potentially providing industry oversight . These are organizations ‘of the industry, for the industry.’  If you have any interest in being part of these associations run by those who have been part of the process all along, please register here.

This past week the group reached out to both FINRA and the SEC on working together to build a trustworthy partnership. Since the legislation mandates that all Crowdfunding websites be registered, the goal is to work with FINRA to see if there’s a way to develop a “Broker-Dealer Light” path for CrowdFund Investing intermediaries or facilitate the formation of a Self-Regulating Organization (SRO) that will oversee the industry.

What’s next for us?

 Lots of speaking engagements!  Sherwood recently spoke about Crowdfunding at the MIT Global Conference in Istanbul, Turkey and keynoted the Rutgers Entrepreneur Day.  Jason testified in front of a Congressional hearing this week about Crowdfunding and is off to speak about Crowdfunding at events in Germany, Sweden and Norway.  We have upcoming engagements in Canada, Brazil and Hong Kong.

People both in the USA and around the world are looking to us as we embark on Web 3.0.  We went from ‘investing for profit’ to ‘investing for social good’ and now we embark on ‘investing from the heart.’

If you or your organization has any interest in learning about CrowdFund Investing, how it will work, how to get involved, who can benefit from it, and what impact it will have globally, then feel free to reach out to us.

Again thank YOU for making this happen!
Sherwood, Jason & Zak

Sherwood Neiss, sherwood@startupexemption.com

Jason Best, jason@startupexemption.com
Zak Cassady-Dorion, zak@startupexemption.com

Hey Rush, How Come Meghan McCain Isn’t A Slut?


“I love sex and I love men.”


Oh, that’s right, Meghan is a) a Republican and, b) a girly girl who “loves sex and loves men” and poses for Playboy. Something I suspect we wouldn’t find Sandra Fluke doing. No, El Rushbo has got Meghan right where he wants her, right in his comfort zone, doing what girls should do. Strictly dickly. No law school for Meghan. No elitist graduate degree seeking snobby girl. No sirree. 

Meghan McCain, MSNBC contributor and political pundit, gave a relatively revealing interview to Playboy this month.

“I’m not private about anything,” the daughter of Arizona Sen. John McCain told the magazine. “I love sex and I love men.”

McCain said that had her father won the 2008 election, the White House would certainly be a different place with her in it.

“You would have the craziest first daughter ever, who’d be making ridiculous headlines and hurting the administration every step of the way,” she said. “That aside, I think Dad would have made an incredible president. The recession wouldn’t have been as bad as it is now. We wouldn’t be pulling troops out of Afghanistan and Iraq. I think morale in the military and in the country at large would be higher, and we’d be much further on the road to recovery.”

The day before the 2008 election, McCain said, she “almost overdosed on Xanax.”

While McCain supports same-sex marriage, she’s not gay. “I’m strickly dickly,” she said, adding: “It might simplify my life if I were gay, but no. … For me, it’s an issue of civil rights. Who people want to sleep with and who they want to love should not have anything to do with government politics at all. And if you see me in a gay bar, it’s only because they play the best music and my gay friends like to dance. Gay guys love me. It’s the big boobs and blond hair.”

McCain also addressed Bristol Palin‘s memoir, in which Sarah Palin‘s daughter described the McCain clan toting Louis Vuitton luggage and relying on “constant helpers to do hair and makeup.”

“I did bump into her at the White House Correspondents’ Dinner,” McCain said. “I saw her across the room. That girl biffed it fast, totally took off. All that stuff she wrote was a total lie. I have, like, one Louis Vuitton purse. She’s just young and confused and was thrust into all this. The media aren’t kind to her. But once someone signs up for ‘Dancing With the Stars,’ it’s hard to sympathize.”


Yes, I guess it’s the big boobs and blond hair, and that strictly dickly attitude that gets El Rushbo. Explains everything.

Amazing Poll Results. And, Obamacare.


The amazing thing about the Health Care Plan, or as I guess now everybody calls it, Obamacare (even President Obama), is that when you poll Americans on whether they approve of Obamacare, an overwhelming majority (72%) say they are against it, but when you ask the very same people whether they like the pre-existing condition part or the children remaining on their parent’s plan part, they overwhelmingly support it (78%)!

Our Supreme Court is concerned largely with the individual mandate component of the law.  Overall, when asked if “the federal government should or should not be able to require all Americans to obtain health insurance or else pay a fine,” just 28 percent of those surveyed said they supported the mandate, while 66 percent opposed it. Republicans polled 15-1 against, while Democrats polled 46-43% against as well. When polled separately, and asked whether they would support Obamacare without the mandate, 68% said they would. Yet, these same respondents said that if leaving the mandate in was the only way that the law would remain in place, 73% said they would support that. The SAME respondents.

How can this be? Are Americans stupid? Well, maybe. Define stupid. The better answer is that if you throw serious amounts of money at the media, behind a well-engineered campaign, you will produce whatever result you desire. The Republicans and their Super-PACs have done a great job of maligning Obamacare to the extent that I believe 8 year-old boys and girls wake up screaming in the middle of the night, convinced that Obamacare is hiding in their closet, just waiting for the right moment to fly out and pounce on them. Probably with some cadaver it just grabbed from an Obamacare death panel.

So, the conclusion is that while we all hate Obamacare (like good little Germans), we all want our kids to remain on our health care plans until they get out of grad school, and we don’t want  those evil insurance companies to be able to turn Aunt Ethel away just because she discovered a lump, or charge her more money to treat other pre-existing conditions. We can’t stand the individual mandate (we don’t believe it’s constitutional, but the only amendments we can name are the first and second, depending upon what part of the country we live in), yet when faced with a world without Obamacare, we’ll go with the individual mandate. After all, we reason, we HAVE to have Social Security cards, and IDs and Auto Insurance (if we choose to drive, and really, who chooses to walk?). We HAVE to go through TSA screening at the airport if we want to fly. There are after all, Justice Scalia, many things our government requires of us, even today, though you’re right, not cell phones … yet.

A Silver Lining For Progressives? 

So, I guess the big spend against Obamacare got its objective done, but even if the Supremos knock it down on constitutionality, some political analysts believe it would make it easier for Obama to cast Republicans in Washington — including conservatives in the Supreme Court — as obstructionists who have worked against the interests of middle- and low-income Americans. So, maybe the big spend to tell the big lie might backfire on the boys in red.

Democratic political consultant James Carville said that if the court were to strike down the law, “the Republican Party will own the healthcare system for the foreseeable future.””Go see (conservative Supreme Court Justice Antonin) Scalia when you want healthcare,” he told CNN.

A ruling against “Obamacare”, as opponents have dubbed the law, could also take much of the steam out of an issue that has been a rallying cry for Republicans seeking to take over the White House and Senate, and keep control of the House of Representatives, in the November 6 elections. Republicans’ portrayals of the 2010 healthcare law as a step toward socialism and a dangerous intrusion by the government into Americans’ daily lives have helped inspire conservatives, including those in the small-government Tea Party movement.

Without “Obamacare” to rally them into action, it is unclear whether some conservatives would remain as passionate about the 2012 elections, analysts say.

“If this whole thing gets overturned, they could certainly lose some momentum,” said Republican strategist Ford O’Connell, adding that Republicans would need to come up with an alternative, free-market healthcare plan to avoid losing the interest of some Tea Party conservatives. “If it gets overturned, (Republicans) are in for a knock-down, drag-out fight” in the November elections, “because … it is going to fire up progressives,” O’Connell said.

More Interesting Poll Results.

In a measure of how difficult it is to generate support for big change in almost any direction on health care, the Medicare restructuring at the center of the House GOP’s long-term budget plan fared as badly in the survey as Obama’s individual mandate. Asked what Medicare should look like in the future, just 26 percent said it “should be changed to a system where the government provides seniors with a fixed sum of money they could use either to purchase private health insurance or to pay the cost of remaining in the current Medicare program.” Fully 64 percent said “Medicare should continue as it is today, with the government … paying doctors and hospitals directly for the services they provide to seniors.”

Even a solid 56 percent to 30 percent majority of Republicans preferred the current system. How’s that grab you?

Crowdfunding Bill Passes Senate!

Senate passes small business investment bill.

I have posted 6 blogs about this topic since January. Thank you all for your letters to your Senators and Congressmen. I am sure your voices helped make this happen. This post is a little wonky, so if you don’t care about the grisly history of getting controversial legislation passed, just read the first few paragraphs.

President Barack Obama supports the measure, which stands to be one of the few bipartisan bills to pass Congress during this politically contentious election year.

Legislation to help startup companies raise capital by reducing some federal regulations won easy passage in the Senate last Thursday despite warnings from some Democrats that less government oversight would mean more abuse and scams.

Sen. Pat Toomey, R-Pa., a leading sponsor of the legislation, said it “might be the most pro-growth measure that this body will consider, perhaps this whole year.”

Democrats did manage to pass one amendment to increase investor protections, so the legislation will still require another House vote. The House passed the measure two weeks ago on a 390-23 vote. The Senate vote was 73-26, with all the “no” votes coming from Democrats.

House Majority Leader Eric Cantor, R-Va., said he would schedule a House vote next week “so we can get this bipartisan jobs bill to the president’s desk for his signature without delay.” That would be THIS week!

The legislation combines six smaller bills that change Securities and Exchange Commission rules so small businesses can attract investors and go public with less red tape and cost. It eases rules on advertising and permits startups to use the Internet and other social media to solicit a large number of small-scale investors.

The measure sailed through the House with almost no opposition but met resistance in the Senate after SEC Chairman Mary Schapiro and numerous consumer and investor groups expressed concerns that it dismantles some of the protections put in place after the Enron scandal and the excesses of the dot-com era. Senate Democrats demanded that investor protections be added to the bill.

On Tuesday, the future of the bill seemed in doubt when Senate Republicans rejected Democratic attempts to add protections to the bill and link it to reauthorization of the Export-Import Bank, an agency that helps U.S. companies finance their sales abroad. The Democratic leadership decided to move ahead after deciding on two amendments that addressed some, but not all, of the investor protection concerns.

That wasn’t enough for some Democrats. The Senate’s no. 2 Democrat, Dick Durbin of Illinois, said the bill would “allow companies to use billboards and cold calls to lure unsophisticated investors with the promise of making a quick buck investing in new companies.” Absolute NONSENSE.

“We are about to embark upon the most sweeping deregulatory effort and assault on investor protection in decades,” Sen. Carl Levin, D-Mich., said.

The centerpiece of the bill is a measure to reduce costs for companies seeking to go public by phasing in over five years SEC regulations that apply to “emerging growth companies.” That status would be in effect for companies with annual gross revenue of less than $1 billion.

The measure would remove SEC regulations preventing small businesses from using advertisements to solicit investors, raise from 500 to 2,000 the number of shareholders a company or community bank can have before it must register with the SEC, and allow smaller companies to sell up to $50 million in shares, compared with $5 million now, without filing some SEC paperwork.

It also encourages the practice of “crowdfunding,” in which the Internet is used to raise capital from a large number of smaller investors. The measure as it passed the House limits individual contributions to $10,000 or 10 percent of the investor’s annual income.

Obama expressed his support for the original House legislation, but the White House also said it supported Senate Democratic efforts to add adequate safeguards for potential investors in light of any reduced government oversight of investment transactions.

The Senate passed, by 64-35, an amendment on crowdfunding that requires websites to register with the SEC, requires promoters who are paid by a company to reveal that fact and requires a company trying to raise money to provide information about its financial condition, business plan and shareholder risks. It limits investments to 5 percent of annual income for those earning under $100,000 a year, or 10 percent for those earning more than $100,000.

The less-regulated House version, said Sen. Jeff Merkley, D-Ore., one of the amendment sponsors with Sens. Michael Bennet, D-Col., and Scott Brown, R-Mass., is “simply a pathway to predatory scams.”

Crowdfunding is now banned because it is not legal to widely advertise and offer securities to the public without SEC registration.

A second amendment, promoted by Sen. Jack Reed, D-R.I., would have tightened the definition of “shareholder” so that large companies don’t undercount the number of their shareholders in order to stay within the shareholder limit, set to rise from 5,000 to 2,000, for SEC registration. It fell on a voice vote.

White House press secretary Jay Carney praised the addition of the crowdfunding protections and said, “We will be vigilant in monitoring this and other elements to ensure the overall bill achieves its goal of helping entrepreneurs while maintaining protections for investors.”

HUGE victory for many small, grass-roots groups without whose efforts, this bill probably would never have been written or come to the floor of either chamber. So, we owe everything to these guys on their relentless pursuit of doing the right thing. What follows is an abridged story of how it happened:

When the Senate moved to vote on the House version of the JOBS bill last Thursday, it included a highly anticipated crowdfunding provision, the origins of which, appropriately, came from “the crowd.”

While there were many groups, companies and individuals involved in shaping the legislation, one of the most focused and sustained efforts pushing for the legalization of large-scale, ownership-based crowdfunding has come from an eclectic collection of internet-connected grassroots influencers: A blogger who first posted his idea on BoingBoing in 2009; the actor Whoopi Goldberg; a group of small business lawyers in Oakland, California; a trio of determined entrepreneursa small business group in Washington, D.C.; and the White House Office of Science and Technology Policy.

This group of influencers have helped push through a big rule change that many entrepreneurs hope could unlock that first stage of seed financing that evaporated with the onset of the recession.

The result of the legislation is that entrepreneurs will be able to test the viability of their ideas in a way that’s currently not possible by raising limited amounts of equity capital from large numbers of people who don’t have to be “accredited” by the Securities and Exchange Commission. And they could spread the word about their business ideas and solicit investors from their social networks online, which under current law is illegal without registering the business with all 50 state regulators.

That current state of affairs struck many in the small business and entrepreneurial community as absurd, at a time when projects on platforms like IndieGoGo and Kickstarter were garnering huge amounts of donations.

“If you try to offer equity to more than 35 members of your friends and family on Facebook, then you could go to jail,” said Woodie Neiss, an entrepreneur based in Miami who’s been working with two of his friends and building a movement for the past year to change the law. “That’s what we’re trying to say: This is silly. Let’s come up with a framework to enable this to work.”

Along with his friends, Neiss has been working with a San Francisco editor, a Washington, D.C. lobbying group for small businesses, and a loose coalition of entrepreneurs, lawyers and academics and the internet to build a grassroots lobbying campaign to influence public opinion and to change decades-old securities law to allow for experimentation with the idea of crowdfunding investments in startups.

Paul Spinrad, executive editor of Make in San Francisco, has worked with Neiss to lead the movement. A software developer and former section editor at WIRED, Spinrad had experimented with a crowdfunding prototype platform in 2003 called Premises, Premises. His later and (current) work at MAKE magazine inspired other business ideas, but he hasn’t had the time or money to invest in them. That led to a series of conversations with friends, and a December 2009 blog post on BoingBoing that solicited ideas from readers about how securities laws could be changed to allow equity-based crowdfunded investments. Spinrad’s initial idea was to persuade the SEC to carve out a regulatory exemption for any capital raising efforts under $10,000, and limited investor involvement of $100 per person.

It turned out that there were a lot of people who were interested in Spinrad’s idea. One group was the The Sustainable Economies Law Center (SELC) in Oakland, a group dedicated to promoting local community-oriented economic growth . Spinrad convinced its co-director Jenny Kassan to help him after reading one of her business columns in a local newspaper. Kassan herself was interested in the concept because she had a background in securities law and consults for small businesses on financing strategies.

At first, Spinrad and the SELC collaborated to petition the SEC to relax its rules on small business fundraising practices. Spinrad, Kassan and their colleagues raised $1,321 from 53 friends and associates in April 2010 to pay a token fee for the legal legwork on the crowdfunding site IndieGoGo. Spinrad documented the campaign’s progress at his personal blog “Change Crowdfunding Law,” and maintained a mailing list of about 200 people who had expressed interest in their campaign.

Over on the East Coast, Neiss and his two friends Jason Best and Zak Cassady-Dorion founded their own initiative called Startup Exemption, through which they hammered out the principles of a crowdfunding framework based on data garnered from the existing range of crowdfunding sites. They suggested a total fundraising limit of one million dollars for each small business, which the Small Business Administration defines as companies with average annual gross revenue of less than $5 million during each of the last three years, or since a business’ incorporation. Investors who aren’t wealthy enough to meet the SEC’s “accredited investor” standard would be limited to investing $10,000 or 10 percent of their adjusted gross income. Under the framework, state securities registration requirements would be pre-empted and entrepreneurs would have to register on a platform with their social security information, their real online identities on social networks, undergo a background check, and expose their business plan and idea to the public, which would thoroughly vet and discuss the idea online, as well as the business’ progress.

The two met in January last year after attending a small business forum convened by the SEC. While Spinrad writes and thinks out aloud on his blog about the nuances and implications of changing the law and tracks the progress of the campaign, Neiss and his friends have been lobbying public opinion and legislators on the issues. The duo have also been in touch with the White House Office of Science and Technology policy, which reached out to them last June: A senior policy advisor working the administration’s StartUp America initiative and doing outreach to the business community had been following Spinrad’s blog and asked the duo to come up with a two-page brief on their crowdfunding exemption idea.

Meanwhile, Neiss had also been working Capitol Hill, his network of friends and generating publicity for the idea. Last January, Karen Kerrigan, president of the Small Business and Entrepreneurship Council, helped Neiss land meetings at the SEC and with Rep. Patrick McHenry, (R-N.C.,) a member of both the House Financial Services and the House Oversight and Government Reform Committees. Several hearings were held throughout the course of the year on a bill that McHenry introduced that would legalize crowdfund investing. The House eventually voted to approve it for the first time last November, with full White House support. (President Obama touted his Startup America initiative in his State of the Union speech this year and reiterated his previous support to legalize crowdfunding.) Shortly after that, Neiss used IndieGoGo to raise money to organize a rally on Capitol Hill to publicize the issue and to urge the Senate to move the legislation, where it faced stuff opposition from state securities regulators and consumer groups.

Then, on December 9th, Whoopi Goldberg weighed in on her Facebook page on the issue, and asked her followers to sign Startup Exemption’s online petition to members of the senate to move the legislation.

“I was at a friend’s dinner in NYC,” Neiss explained in an e-mail. “I was talking about how hard it is to get capital for startups. One of the guys turned out to be President of Whoop Inc. He asked if there was anything they could do to spread the word. I met with them and they started to help spread the word.”

In the Senate, up until Tuesday, two versions of a crowdfund investing bill have been competing for legislators’ support: S. 1791, Sen. Scott Brown, (R-Mass.)’s Democratizing Access to Capital Act, and Sen. Jeff Merkley, (D-Oregon)’s Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act (CROWDFUND). Both were introduced in December. Brown’s was supported by crowdfunding boosters, while Merkley’s was supported by state securities regulators.

The political climate is on the crowdfunding supporters’ side. Both the administration and Congress want to be seen doing something to boost the economy in an election year.

Tim Rowe, founder and CEO of the Cambridge Innovation Center, testified in front of the senate banking committee last week generally in support of the idea, with his own suggestions on how to improve on the current proposals. Wefunder.com, a crowd investing platform for startups, which is a startup itself at the innovation center, has launched an online petition in support of Brown’s legislation. More than 2,800 people have signed it since it was launched at the end of January.

Both Spinrad and Neiss are excited.

“We don’t understand why everyone isn’t talking about this,” said Spinrad in an interview. “This is an amazing, fundamental change, and it’s something everyone can relate to. Everyone knows Kickstarter, and everyone knows of a local restaurant that needs to get funded.” 🙂

He hasn’t sat back on his laurels even though the legislative momentum appears to have been on his camp’s side. So what did he do? Launch another crowdfunded effort to fund another campaign, of course.

In mid-February, he and the American Sustainable Business Council launched a new campaign on a new crowdfunded media-buying platform called Loudsauce to raise $13,530 for a full-page POLITICO ad about crowdfunding legislation.

It’s happening, kids!

Hold Your Nose and Watch the Sausage.


Senate votes to move ahead on small business bill

As much as I cannot stand to watch this process and listen to the petty partisan bickering and ugly back-room deal making, this bill is so important to the future of peer-to-peer lending, small business access to capital and the future of our space, that I HAVE to watch it.

So, legislation making it easier for small businesses to raise money survived a test vote in the Senate yesterday, increasing the chances it could emerge as one of the few bipartisan bills to pass Congress during this election year.

The procedural vote was to cut off debate and move the measure toward passage. Only a day earlier, the legislation that had passed the House two weeks ago by an overwhelming margin appeared in danger of dying.

Senate Democrats met late Tuesday to discuss how to proceed after Republicans succeeded in blocking Democratic amendments that would have increased protections for those investing in small businesses and start-ups, and extended the life of the Export-Import Bank. Why can’t we stick to a single topic?

The 76-22 vote to move forward sets up a vote on final passage planned for Thursday after the Senate votes on two amendments addressing aspects of investor protection. Approval of those proposals would send the bill back to the House.

President Barack Obama has expressed his support for the legislation, which would ease some federal rules so small companies and innovators could more easily attract investors and go public. And, create JOBS!!! But the White House has said it supported Senate Democratic efforts for adequate safeguards for potential investors in light of any reduced government oversight over investment transactions.

Senate Republicans said the legislation was a bipartisan effort to eliminate federal red tape and create jobs, and they stuck together on the test vote.

“We need to show the American people that we can do this,” said Senate Republican leader Mitch McConnell, R-Ky. “This bill is exactly the kind of thing Americans have been asking for, greater freedom and greater flexibility.”

Democrats were split; some said they could not back the legislation because of inadequate investment protections.

“This bill would allow companies to advertise virtually unregulated stock offerings on television or on billboards,” said Sen. Carl Levin, D-Mich. He said the House bill would let large companies with many shareholders avoid regulation by the Securities and Exchange Commission.

The head of the SEC, Mary Schapiro, has written Congress listing concerns about how the bill could open up investments to possible fraud and abuse. This is BOGUS and it is simply code for a bureaucrat trying to retain control. The chairman of the House Financial Services Committee, Rep. Spencer Bachus, R-Ala., has said the bill contains strong investor protections and that Senate Democratic objections were part of a “cynical campaign strategy of running against a so-called do-nothing Congress.”

The centerpiece of the bill is a measure to reduce the costs of companies seeking to go public by phasing in over five years SEC regulations that apply to what are categorized as “emerging growth companies.” That status would be in effect for companies with annual gross revenue of less than $1 billion.

The measure would remove SEC regulations preventing small businesses from using advertisements to solicit investors, raise from 500 to 2,000 the number of shareholders a company or community bank can have before it must register with the SEC, and allow smaller companies to sell up to $50 million in shares, compared with $5 million now, without filing some SEC paperwork.

It also encourages the practice of “crowdfunding,” where the Internet is used to raise capital from a large number of smaller investors. The measure limits individual contributions to $10,000 or 10 percent of the investor’s annual income.

Senate Democrats who sought to amend the crowdfunding provision said that without changes the practice could lead to fly-by-night schemes to attract vulnerable investors to risky or deceptive ventures.

The rejection of the amendment to extend and expand the life of the Ex-Im Bank also angered Democrats, who said that without the bank U.S. companies would lose a crucial means of financing overseas sales. The bank’s authority expires on May 31, and before that it will hit its lending limit of $100 billion. The Democratic proposal would have extended that authority for four years and raised the lending limit to $140 billion.

McConnell said Republicans were willing to take up the bank’s fate in separate legislation. While supported by most major business groups, the bank is opposed by conservative groups such as the Club for Growth.

So, if you haven’t yet, please tweet or e-mail or text your Senator and .beg him or her to get this passed. Thank you.


Don’t Mess With Texas.

Texas Farmer Takes On TransCanada

The debate over the Keystone XL pipeline has moved from the White House to a farm in Texas. Third-generation farmer Julia Trigg Crawford is engaged in a court battle over whether TransCanada, the company that wants to build the massive pipeline from Canada to Texas, has a right to declare eminent domain on a portion of her family’s farm.

Early last week, TransCanada announced that it intends to move forward with the portion of the Keystone XL pipeline that extends from Oklahoma down to Texas. This 485-mile-long portion of the pipeline doesn’t cross international borders, which means it won’t need approval from the State Department or President Obama. But it does cross right through Red’Arc Farm, which Crawford and her family own.

The farm is in Direct, Texas, a small town about 20 miles northwest of Paris (city notable for it’s own 65-foot-tall replica of the Eiffel Tower, complete with a cowboy hat on top). Along with her father, sister, and brother, Crawford, 53, tends to her soybeans, wheat, corn, orchards, and cattle on this 600-acre property where the Red River and Bois d’Arc Creek meet. Her grandfather bought the land in 1948, and Crawford currently lives in the farmhouse.

Back in 2008, the family got notice that TransCanada was interested in running a pipeline through a 30-acre pasture area. Crawford says they were first offered $7,000 for use of the land, though the figure later increased to $20,000. The Crawfords weren’t entirely opposed to having a pipeline run through the farm since there are several others running through the county. “Pipelines are not foreign here,” Crawford says. But then an initial archeological assessment of the property conducted by a firm the company hired found that the portion of the pasture the company was first interested in was full of artifacts left by the Caddo, a local American Indian tribe. That was not a big surprise to Crawford. “I pick up pieces of pottery all the time when I walk the dogs,” she says. She keeps the bits of pottery and arrowheads she finds in a large jar.

So the company proposed an alternate route through another corner of the same pasture, hoping to avoid the archeological site. But according to the next inspection the archeological firm undertook, there were no artifacts in this new corner. That the second dig turned up nothing made Crawford suspicious, and she decided to get an independent survey of the site—which again turned up quite a few artifacts (see the archaeologist’s report here). She hoped that the reports would force TransCanada to pick a new route, but she says the company insisted on going right through the pasture. “They said if you don’t sign the easement we have the right to condemn the land and take it through eminent domain,” she said.

She had other concerns about the pipeline, like the repercussions of a spill or the impact building the line might have on her ability to use the pasture. She says she tried to talk to the local contact person for the company and asked for concessions like thicker pipe metal, deeper burial, and assurance that her family would be compensated if the pipeline spilled into the creek they use for irrigation. The company didn’t offer any concessions, she says, and instead took the Crawfords to court last fall to claim eminent domain on the property. (The company has taken a similar tack with landowners in Nebraska as well.)


That tipped off a legal battle that’s still ongoing. For one, Crawford believes that she and her family were never offered a fair price for their land. And for another, she thinks that the archaeological and historical value of the land outweighs the desire of a private company to dig through it. But the main reason she’s fighting eminent domain on her land is that she doesn’t think TransCanada has a right to declare it. Under Texas law, pipeline regulation is handled by the Railroad Commission. But the commission “does not have the authority to regulate any pipelines with respect to the exercise of their eminent domain powers,” it states on its website. So if a company is building an oil or gas pipeline in Texas, it’s generally able to declare eminent domain on any route it wants.

But Crawford argues that there should be some kind of demonstrated public good before a private company can seize her land—or at least a state agency that has some oversight power. She’s hoping to challenge TransCanada’s claim that it can take the property when they go to court in April—particularly since the company doesn’t yet have all the permits necessary to start construction. “A foreign-owned, for-profit, nonpermitted company has been allowed by loopholes to condemn my land,” she says. “It’s about landowner rights.” Her story gotten quite a bit of press coverage in the last week, and she’s launched an internet petition that has drawn more than 15,000 signatures of support.

TransCanada has vowed that it won’t let Crawford stand in the way of the pipeline. “We are not going to have one landowner hold up a multibillion-dollar project that is going to be for the benefit of the public,” the company’s lawyer told the court in their Feb. 17 hearing, according to Reuters. “They’re entitled to their day in court, but they’re not going to be able to stop the pipeline project under (Texas law).” Really?

Last week, a judge waived the restraining order that Crawford had requested against TransCanada, so now she worries that the company might start laying the groundwork for the pipeline at any moment. “We’re all looking out the window every hour.” For now, though, she’s waiting for their next round in court.

Rich People Create Jobs!

And five other myths that must die for our economy to live.

Rich guy

 Illustration by Zina Saunders.

In the movie Groundhog Day, Bill Murray‘s character is forced to relive a single day over and over and over—waking up to the same song every morning, meeting the same people, having the same conversations—until, after thousands of repetitions, he finally realizes what a shmo he’s been his entire life. With that epiphany, the calendar starts to flip forward again. His life reboots, and he once again gets to hear new songs, meet new people, and have entirely new conversations.

When it comes to the economy, we’re stuck in our own version of Groundhog Day—and this one doesn’t seem to be coming to an end. America is in a deep and persistent slump, and unemployment is mired at more than 9 percent. Yet when you turn on the TV, all you hear are the same manufactured sound bites delivered in the same apocalyptic tones from the same pack of talking heads—over and over and over. Groundhog Day has turned into the eighth circle of hell.

Unfortunately, these zombie talking points aren’t just wrong; they’re dangerous. If we’re ever going to revive the economy, we’ve got to tackle them head on. Here are six of the worst.


For the first four years of his presidency, Franklin Roosevelt tackled the Great Depression with inflation, easy monetary policy, and government spending. But in 1937, FDR’s advisers persuaded him to reverse gears. After all, interest rates had been close to zero for years, commodity prices were climbing, and fear of inflation was on the rise.

Bust or Boost?

What happened next is now called the “Mistake of 1937” (PDF). Federal spending was cut and monetary policy was tightened up, with disastrous results: GDP immediately began to plummet, and industrial production fell by a third. Within a year everyone had had enough. In 1938 the austerity program was abandoned, and the economy started to grow again.

The truth is that stimulus worked in 1933 and it worked in 2009. So why is our economy still in such bad shape? For one, partly due to political considerations and partly because it was rushed through Congress, the 2009 stimulus wasn’t as well designed as it could have been. It was also sold badly. If the bill passed, administration economists predicted, unemployment would peak at 8 percent and then start declining (PDF). But the recession was far worse than the White House originally thought. Unemployment peaked in the double digits, and that’s made the stimulus a fat target for Republican critics ever since.

But as awkward as it is to argue that things would have been worse without the stimulus—”Not as bad as it could have been!” isn’t a winning slogan—well, the truth is that things would have been a lot worse without the stimulus. Everyone from the nonpartisan Congressional Budget Office (PDF) to private-sector forecasting firms have concluded that it increased economic growth, reduced unemployment, and put millions of people back to work. It just wasn’t big enough, or long-lasting enough. Unfortunately, this has given conservatives an opening to demand tighter money and lower spending—exactly the same mistake we made in 1937.


If your credit card company offered you $30,000 interest-free to buy a car, would you take the deal? Sure you would. It’s a three-way win: You replace your clunker, the auto industry keeps its assembly lines humming, and the credit card company is happy to have made a safe loan, even at no interest. Apparently, they think you’re a pretty good credit risk.

The Bush Effect

This is pretty much the situation the US government is in now. If our national debt were really at dire and unsustainable levels, as conservative economists and Republican leaders have taken to arguing, nervous investors would be driving up interest rates on federal borrowing. But just the opposite has happened: As I’m writing this, 10-year real treasury yields are at 0.00 percent. The seven-year rate is actually negative. Apparently, the financial markets think we’re a pretty good credit risk.

It’s true that the United States needs to address its long-term deficit problem—a problem almost entirely due to Medicare and other health care expenditures. (Domestic, defense, and Social Security spending have actually decreased as a percentage of GDP over the past 40 years, and there’s no reason to think that’s about to change.) But that’s in the long term. Right now, our problem is a sluggish economy and too many people out of work. The real answer to future deficits is to spend money now to get the economy growing again.

America’s infrastructure is crumbling, there are people who could be put to work fixing it, and banks are practically begging us to take their money. A trillion dollars in infrastructure spending would be good for our economy today, good for economic growth tomorrow, and thanks to those low interest rates (and the increased revenue that would come from growth), it wouldn’t even increase our debt much. As they say, only an idiot turns down free money.

Only an Idiot Turns Down Free Money


There’s no greater orthodoxy in the Republican Party than unconditional fealty to tax cuts. In a recent GOP debate, when the candidates were asked whether they’d walk away from a deficit deal that included just $1 in tax increases for every $10 in spending cuts, every single hand shot up.

Taxes have been the third rail of American politics ever since the California tax revolt of 1978. Even Democrats are nervous about touching them: President Obama has famously called for letting some of the Bush tax cuts expire, but he’s always careful to make it clear that he wouldn’t change rates for anyone earning less than $250,000 per year. In other words, he’d repeal less than a quarter of the Bush tax cuts.

This fear is easy to understand. No one likes paying higher taxes. But do lower taxes actually spur economic growth? Bruce Bartlett, an economist in the Reagan administration, has compared tax rates in various rich countries in 1979 to each country’s growth rate since then. His conclusion? There’s virtually no correlation.

Recent US history backs this up too. Bill Clinton raised tax rates in 1993, and Republicans insisted it would cripple the economy. Instead, the economy boomed. In 2001 and 2003, George W. Bush lowered taxes and Republicans insisted the economy would flourish. Instead, we got the weakest expansion of the past century. Republicans are simply wrong about taxes: Within reason, high tax rates don’t hinder growth, and low tax rates don’t stimulate it.

But don’t high taxes reduce the incentive for people to work? Actually, no: For ordinary wage earners, participation in the job force and total hours worked barely respond to taxes at all. (According to tax specialists Joel Slemrod and Jon Bakija, this is “a rare example of a question on which there is a broad consensus among economists.”) The same is true for rich people. As a trio of prominent economists concluded last year after reviewing the literature, “there is no compelling evidence to date of real economic responses to tax rates” (PDF).

Even capital gains rates have virtually no impact: During the past few decades, they’ve bounced up and down from 40 percent to their post-Depression low of 15 percent. The effect on business investment is nil.

If a Tax Rate Falls…

Will the Economy Notice?



Are American businesses paralyzed by fear of a tidal wave of new regulations? When McClatchy  reporter Kevin Hall went out and asked small-business owners about this, he got a clear answer. “Absolutely, positively not,” said one. “Government regulations are not choking our business,” said another. In its most recent quarterly survey (PDF) of small-business trends, the National Federation of Independent Business reports that sales—i.e., lack of demand—is the No. 1 concern, beating out taxes, regulations, inflation, and everything else.

The Bottom Line Is the Bottom Line

In any case, regardless of what the Wall Street Journal editorial page says, the Obama administration has hardly been a whirlwind of regulatory activity. Its health care reform will have very little effect on either small businesses (which are exempt) or large businesses (which mostly offer health plans already) and only a modest effect on medium-size businesses (PDF). Its financial reform bill affects only the financial sector. Its proposed new air-quality regulations will mostly affect old coal-fired electrical plants that would have shut down anyway (PDF).

Dumb and outdated regulations are no friends to the economy—and the Obama administration has undertaken a regulatory review that’s projected to save an estimated $10 billion during the next five years. But as welcome as that is, our economy’s biggest problem right now isn’t regulatory uncertainty. It’s economic uncertainty.


In one of the most infamous moments of his young candidacy, Republican presidential hopeful Rick Perry decided to tee off on Federal Reserve Chairman Ben Bernanke last summer. “If this guy prints more money between now and the election,” he told an enthusiastic audience in Cedar Rapids, “I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas.”

Bernanke’s sin? Pumping money into the banking system after the collapse of 2008. Although this is widely credited with helping prevent a second Great Depression, tea partiers and gold bugs are convinced that Bernanke’s actions have debased the dollar. There are two problems with that claim. First, it’s not true. Second, we’d be better off if it were.

 First things first: Has the dollar lost value under Bernanke and Obama? No. The usual measure for the strength of the dollar is called “trade-weighted value.” In July 2008, just before the financial crisis erupted in earnest, the greenback’s value stood at 95.4. As of this writing it is sitting at 96.1. Taking a longer view, the dollar lost value under Reagan and Bush I, gained value under Clinton, lost value under Bush II, and has mostly stayed steady under Obama. There’s just no basis to the claim that Obama and Bernanke have debased the currency.

And that’s unfortunate. As economist Dean Baker is fond of pointing out, if we want to get our national savings rate up and our long-term budget deficit down, there’s only one way to do it: by fixing our massive trade deficit. We have to import less and export more, and one way to make that happen is with a weaker dollar. A weaker dollar makes foreign goods more expensive, so we’ll buy less of them, and makes American goods cheaper, so others will buy more of them.

The truth is that we’d be better off if we ditched the loaded “strong/weak” terminology and just talked about an “export dollar” (weak) and an “import dollar” (strong). Sometimes one is good, and sometimes the other is. The Chinese, for example, have done well for decades with an export Yuan. Likewise, an export dollar would be our friend right now.

Bad News for Tourists…

Is a Holiday for Manufacturers


Think of this as the supermyth—the one underlying so many other fallacies. For decades, America’s economic policies have been based on the notion that catering to corporations and the wealthy is the way to stimulate the economy. Republicans routinely insist that we need to bail them out, lower their taxes, allow them to repatriate hundreds of billions in overseas profits, and free them from annoying government meddling. If we don’t, the “job creators” will stay in a funk, and the economy will stay in a rut.

But here’s a pesky fact neither corporate America nor the GOP establishment is trumpeting: After-tax corporate profits are currently at an all-time high. The problem businesses face isn’t lack of cash but rather a lack of confidence that consumer demand will pick up in the future. So they’re not expanding or hiring at the rate they should be.

Rich people don’t create jobs when we hand them big windfalls. They create jobs when the economy is growing and they have customers for their businesses. And the key to solving that problem, at least during a deep economic slump like the one we’re in now, is to focus like a laser on more stimulus, easier money, higher inflation, and a weaker currency. Unless we want to relive 1937 over and over and over again. As Bill Murray said, “Anything different is good.”

Wall Street’s Gain…

Main Street’s Pain

This November, please vote responsibly!