Friday, March 16, 2012

Diamond in the Rough

The "Jobs Bill," currently under consideration by the United States Senate is a terrible piece of legislation. Nothing surprising about that. The fact that it is bi-partisan only adds to its odor. However, buried within the bill is a provision that limits some of the worst provisions of the Sarbanes-Oxley legislation of 2002 that has all but destroyed the US IPO market. Sarbanes-Oxley is the legislation that was passed in the heat of reaction to Enron and World Com and is one of the worst pieces of finance legislation that ever found its way through Congress (although Dodd-Frank is certainly even worse).

Sarbanes-Oxley was a reaction to the fact that the US stock market, from 1981 until 2002, had increased 1200 percent. That, apparently, was an inadequate return, according to the political class...hence the adoption of Sarbanes-Oxley. Since Sarbanes, Oxley, the stock market has basically done nothing, which, I suppose, is more in keeping with what the political class deems to be a more investor-friendly climate. Both SOX and it's step-brother, Dodd-Frank, have placed the American financial system in the deep freeze and other financial centers around the world could not be happier. Seeing American voluntarily abdicate its pre-eminence in world finance plays right into the game plan of Europe, China and all of our competitors.

Thus, the effort to give the IPO market a breather from the Attila the Hun approach of the Congress to free markets.

But, watch out. Now the political class is objecting. Even the Council of Institutional Investors has even weighed in. You might think that such a weighty institution is non-political, but you can forget that. The CII is dominated by far left politicos whose main goal is to use a heavy sledge hammer on American corporations and they are succeeding. Now the CII wants even this glimmer of help to those seeking access to capital markets to go take their case to foreign capitals. America is no longer the place to bring your IPO, so says the CII and the left wing political class. So, this small effort to give breathing space to companies seeking to raise capital is under siege.

This was the only decent provision in the "Jobs Bill." The rest of the bill is embarrassing. Perhaps the diamond in the rough will survive. We shall see.