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Entrepreneurs Watch As Crowdvesting Bill Stalls In Senate

timothy posted more than 2 years ago | from the please-fill-out-form-1099-qed dept.

Businesses 182

cayenne8 writes "The JOBS Act bill, passed in the house, has stalled in the senate. One section of this bill, which would legalize 'Crowdsourcing' in the U.S., as it is in other countries, allowing companies and startups (like indie film makers) to solicit investments for profit over the internet. This differs from sites like Kickstarter, which allow you to only donate money, in that this bill will allow the common citizen to invest for potential profit ($10K or 10% of income for investor limits) in new ideas and companies."

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Actually, it's now been passed with amendments (5, Informative)

webplay (903555) | more than 2 years ago | (#39443381)

JOBS Act! (1)

Anonymous Coward | more than 2 years ago | (#39443489)

Catchy acronym! If you don't vote for the JOBS act, you are AGAINST CREATING JOBS. This therefore MUST pass.

Re:JOBS Act! (1)

Anonymous Coward | more than 2 years ago | (#39443605)

Or are against resurrecting Steve JOBS with Ash2Life, the un-cremating cream, now in a convenient powder.

Re:Actually, it's now been passed with amendments (3, Informative)

Anonymous Coward | more than 2 years ago | (#39443853)

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

So for those of us in the $50k-$100k category that limits the investment to $2,500-$5000 instead of $5,000-$10000.

Doubles the number of investors needed.

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

Re:Actually, it's now been passed with amendments (5, Insightful)

sexconker (1179573) | more than 2 years ago | (#39444131)

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

So for those of us in the $50k-$100k category that limits the investment to $2,500-$5000 instead of $5,000-$10000.

Doubles the number of investors needed.

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

It's not cautious, it's designed to prevent you from profiting off of investments or funding your business outside of a major stock exchange.
Any American investments greater than 1 pittance must first be taxed by banks and stock brokers, then left in their control to fuck up.

You're not unamerican, are you?

Re:Actually, it's now been passed with amendments (1)

MickyTheIdiot (1032226) | more than 2 years ago | (#39444323)

I wish I could mod this up.

Every action that Congress makes, especially THIS particular election cycle, is what their lobbyist buddies want first and what is good for the overall country second. The common good motive has totally gone out the window and it's totally corrupt. There was doubt before but there isn't now.

Re:Actually, it's now been passed with amendments (0)

Anonymous Coward | more than 2 years ago | (#39444343)

10% will break most people, financially. There's a reason that only "qualified investors" are allowed to invest in high risk, high dollar ventures. It's certainly not the "free market" answer the libertarians want, but it's also not a conspiracy. Note that this investing happens long, long before the stock exchagne and brokers that you retardadly assume is involved.

Re:Actually, it's now been passed with amendments (0)

Anonymous Coward | more than 2 years ago | (#39445007)

Since when is "Americanism" determined by government regulations? What the hell? Any real American wants this shit cleaned up, and the sooner the better. Where's our Teddy Roosevelt when we need him?

P.S. are you sure you're pro-American? The tone of your post sounds like you're not. Stop telling other people what "un-American" means.

Re:Actually, it's now been passed with amendments (1)

dgatwood (11270) | more than 2 years ago | (#39444187)

10% of your annual income shouldn't break you financially unless you are only making $20,000 per year. Then that's three months' rent.

It should probably be more like:

  • For individuals making over $100,000 annually (automatically adjusted for inflation), no maximum.
  • For individuals making between $50,000 (adjusted) and $100,000 (adjusted), a maximum of 10%.
  • For individuals making between the poverty line and $50,000 (adjusted), a maximum of 5%.
  • For individuals making below the poverty line, a maximum of $100 (or possibly zero).

Or you might merge the two middle categories into a single category at 5% or 10%. Either way, such a scheme would prevent unscrupulous businesspeople from taking advantage of people who cannot afford to be taken advantage of. And that should be a cap on total spending for any given year, not a maximum per investment.

Also, there should be no cap if your net worth is above some figure, regardless of income. Let's call it a million dollars, though this is somewhat arbitrary. The idea, of course, is that someone with a few million bucks in the bank who decides to not work for five years can afford to blow money on stock in ways that someone with no savings who has been out of a job for five years can't.

Re:Actually, it's now been passed with amendments (1)

tidepool (137349) | more than 2 years ago | (#39444701)

10% of your annual income shouldn't break you financially unless you are only making $20,000 per year. Then that's three months' rent.

It should probably be more like:

  • For individuals making over $100,000 annually (automatically adjusted for inflation), no maximum.
  • For individuals making between $50,000 (adjusted) and $100,000 (adjusted), a maximum of 10%.
  • For individuals making between the poverty line and $50,000 (adjusted), a maximum of 5%.
  • For individuals making below the poverty line, a maximum of $100 (or possibly zero).

Or you might merge the two middle categories into a single category at 5% or 10%. Either way, such a scheme would prevent unscrupulous businesspeople from taking advantage of people who cannot afford to be taken advantage of. And that should be a cap on total spending for any given year, not a maximum per investment.

Two points:

Just curious your thoughts on all the state lotteries, both 'instant win scratch tickets' and those drawn via numbers. There is NO cap on how many tickets people buy, and we've all seen people in the gas stations dropping $60 on tickets and $10 of gas for their truck. If you talk to the workers, some of them are regulars on intervals as frequent as every morning, some just once a week, and some, well, just once. To me, having someone invest in (this company, whatever it is) in order to hopefully create a profit for themselves is a) more rewarding for society as a whole (perhaps not the state budgets...) b) More rewarding to the person doing the 'investing' (the prior scratch ticket winner), as it requires thought and far more interest than pure monetarily expectations.

Secondly, Why should one exclude 'the poor' (you're pretty-much referring to myself, but I am NOT calling myself poor... ) from taking action into a company or companies that they feel have great/good/marketable ideas? My of my friends are in the same financial 'boat' as I am, give / take, and they often have smart ideas that could be worth investing in....

Cheers,

Re:Actually, it's now been passed with amendments (1)

tidepool (137349) | more than 2 years ago | (#39444713)

Shit, left the quote on:

Two points:

Just curious your thoughts on all the state lotteries, both 'instant win scratch tickets' and those drawn via numbers. There is NO cap on how many tickets people buy, and we've all seen people in the gas stations dropping $60 on tickets and $10 of gas for their truck. If you talk to the workers, some of them are regulars on intervals as frequent as every morning, some just once a week, and some, well, just once. To me, having someone invest in (this company, whatever it is) in order to hopefully create a profit for themselves is a) more rewarding for society as a whole (perhaps not the state budgets...) b) More rewarding to the person doing the 'investing' (the prior scratch ticket winner), as it requires thought and far more interest than pure monetarily expectations.

Secondly, Why should one exclude 'the poor' (you're pretty-much referring to myself, but I am NOT calling myself poor... ) from taking action into a company or companies that they feel have great/good/marketable ideas? My of my friends are in the same financial 'boat' as I am, give / take, and they often have smart ideas that could be worth investing in....

Cheers,

Re:Actually, it's now been passed with amendments (0)

Anonymous Coward | more than 2 years ago | (#39445003)

The rent thing I didn't get the point of. Typically expenditures scale with income.
So, if you're earning $20k a year, you are probably sharing rent expenses with others and/or living in a part of the country where rent is cheaper.

Anyway. Let people decide what they want to do with their money. I can totally see a community of the poor pooling their resources to build some cool business, except you just capped them at 0% with your scheme.

Re:Actually, it's now been passed with amendments (1)

datavirtue (1104259) | more than 2 years ago | (#39444485)

What do they care about MY finances?

high risk with money you can afford to lose (1)

peter303 (12292) | more than 2 years ago | (#39444631)

Prior to this bill you could only invest VC money beyond a million dollars you have saved. It presumed you could afford to lose money over a million dollars.

Re:Actually, it's now been passed with amendments (0)

Anonymous Coward | more than 2 years ago | (#39445133)

A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

For many people, even that amount will cause serious problems and there is a contradiction here - if an investment is large enough to be meaningful, it is large enough that people don't deserve to get ripped off. There is a risk of 'salami-fraud': rip hundreds of people off for a relatively small amount and nobody will bother to spend thousands in legal fees getting it back. In addition, the limit seems to be per investment - a dubious operation could sell multiple different dodgy 'investments' and get more money that way.

Even ignoring that, there are basically four problems that arise:

  • Scammers touting completely fake companies and taking money from people who think they are investing in a start-up
  • People who raise the money and then waste it all on perks and bullshit, safe in the knowledge that as they never had to have proper internal controls over expenses or produce GAAP-compliant accounts it will never be easy to prove fraud or mis-representation against them
  • Hopelessly poorly-run companies which lose all the money but as they have no proper accounting they don't realise it until they go spectacularly insolvent and creditors, shareholders etc get shafted.
  • Legitimate companies that fail, but the founders are then accused by some of the investors of being one of the above and are endlessly harassed and besmirched. In my experience small-time investors are often prone to consider that if they have lost money in a business then 'someone must have stolen it'. That's one reason why I wouldn't even want to take money from investors to start a business unless I was confident that they understood at least basic finance and accounting.

When was it made illegal? (4, Interesting)

cpu6502 (1960974) | more than 2 years ago | (#39443389)

Why was Profiting from Crowdsourcing a movie, song, or book made illegal? And when did it happen.

Re:When was it made illegal? (5, Informative)

blakelarson (1486631) | more than 2 years ago | (#39443479)

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars. Only when you have a detailed, SEC-approved prospectus can you sell shares publicly as a C-corp. This is an expensive endeavor for small operations. So they raise "private" money, but mostly from accredited investors, who are supposedly rich enough to not do stupid things with their money. Or at least have the resources to sue the people running the company. Kinda arbitrary. But the key is that a company cannot publicly solicit investors. I think that crowdsourcing is a great idea, but we need to be sure to cover the potential for abuse. There's a reason the laws are in place. I'd love to be able to raise some cash this way.

Re:When was it made illegal? (5, Informative)

Anonymous Coward | more than 2 years ago | (#39443651)

That is exactly what the Senate amendments to the bill address: http://www.crowdsourcing.org/editorial/a-look-at-the-proposed-amendments-to-the-crowdfunding-bill/12669

The gist of the amendments (which I believe just passed) tighten up the certification and disclosure rules, the requirements for investors (based on annual income), and some important arcana on who is allowed to advertise these things (e.g., no pump-and-dump schemes.) The amendments strike me as a fairly good idea-- if you're asking for a half a million dollars from random people you don't know, then, yes, you're gonna get a CPA to certify and publicize your finances.

With those amendments, the overall idea also strikes me as a good idea. Sanity seems to have prevailed, assuming the House approves the amendments.

Re:When was it made illegal? (1)

blakelarson (1486631) | more than 2 years ago | (#39443733)

I agree. Sounds like it's moving in the right direction. Just providing a little perspective on why things are the way they are.

Re:When was it made illegal? (-1)

Anonymous Coward | more than 2 years ago | (#39443945)

Under the S. 1884 amendment, three different caps would be introduced: a maximum of 2% of investors’ annual gross income for individuals earning up to $40,000 a year; up to 5% for investors earning up to $100,000 a year; and a cap of 10% for those earning above $100,000.

This isn't right. The cap for $40,000/year is 2% of income. Come on, is it really investing when you're limited to putting only $800 into something? If I see an opportunity, I'd like to have the freedom to shoot myself in the foot. It's my money. I don't need a bureaucrat to tell me what I can and cannot do with it.

Re:When was it made illegal? (5, Interesting)

Animats (122034) | more than 2 years ago | (#39443761)

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars.

Right. There is a long, long history of investment scams, from John Law's bank to Florida real estate to "High Yield Investment Plans. The current big scam thing is "distressed real estate". That's why we have SEC registration and mandatory disclosures. Here are some recent scams of that type. [securities...d-blog.com]

"Crowdfunding" is about selling unregistered securities to individuals. This usually ends badly.

If anything, the rules on who is a "qualified investor" and can invest in private placements should be tightened up. At present, pension funds are considered "qualified investors", which means they can invest in hedge funds. That didn't work out too well around 2008.

Re:When was it made illegal? (1)

cpu6502 (1960974) | more than 2 years ago | (#39443909)

Yeah it's sad when uneducated persons make unwise investments, and then lose everything. I knew a guy who thought he'd won the lottery, and stupidly mailed-off the money.

Then he lost his job, which was no big deal but the unemployment eventually ran-out (2 years). NOW he's dead, because he had ~30,000 racked-up on credit cards with no incoming money, and unable to pay his bills, so he ended his life.

Re:When was it made illegal? (1)

blakelarson (1486631) | more than 2 years ago | (#39443993)

Sad part: since he was rich, he was considered knowledgeable according to the SEC. I don't know a better way of determining the financial savvy of private investors, but assets / income surely can't be the only way.

Re:When was it made illegal? (1)

pclminion (145572) | more than 2 years ago | (#39444133)

Then he lost his job, which was no big deal but the unemployment eventually ran-out (2 years). NOW he's dead, because he had ~30,000 racked-up on credit cards with no incoming money, and unable to pay his bills, so he ended his life.

Guess it didn't occur to him to maybe sell some of the shit he bought on credit, to pay that balance (partially) down? He thought ending his life was preferable to giving up whatever junk he bought. That's not stupid, that's crazy.

Re:When was it made illegal? (1)

MickyTheIdiot (1032226) | more than 2 years ago | (#39444351)

You may be right, but you need to remember it's a pretty god damn easy thing to do to second guess someone.

Re:When was it made illegal? (1)

cpu6502 (1960974) | more than 2 years ago | (#39444839)

The creditors took his storage shed. That left him with nothing but his house (mostly empty). Of course he could have sold his house, paid off his cards, and then lived in an apartment. But some people don't want to give-up the house. (We're seeing that right now with people unable to pay their mortgages but refusing to leave.)

Re:When was it made illegal? (1)

datavirtue (1104259) | more than 2 years ago | (#39444545)

Uh....a measly 30k in debt? Not enough to end your life, he obviously had other issues. Next to my life and happiness I do not care one iota about my credit card bills.

Re:When was it made illegal? (-1)

Anonymous Coward | more than 2 years ago | (#39443911)

What? And force state governments to confront the reality of their underfunded pension obligations?
NEVER!!@

Re:When was it made illegal? (1)

datavirtue (1104259) | more than 2 years ago | (#39444555)

None of the states have an under-funded pension.

Re:When was it made illegal? (0)

Anonymous Coward | more than 2 years ago | (#39444559)

Look at the rate of kickstarter projects getting cancelled, but getting lots of press (before being canceled)

Re:When was it made illegal? (1)

cdrguru (88047) | more than 2 years ago | (#39444597)

A huge problem today is pension funds investing, period.

What a pension fund wants is some growth but stable growth and a solid indication that they aren't going to lose anything, ever. That is perfect for AAA bonds but really awful for investing in company stock in any form. Since these funds have so much money to invest - usually in big blocks - they have a great deal of influence. Which means once your company is deeply in with a pension fund or two as major stockholders the company must be run in a manner that produces steady, stable growth and will never, ever lose money. This generates a risk-adverse environment and means companies that are supposed to be engaging in high-risk investments for the future have to change their methodolgy if they want to keep their major stockholders happy.

Hence we have a lot of companies that should be throwing cash at projects which might fail but might also pay off big deciding not to do much at all like that. Risk-adverse means no big risks, no big rewards, but happy stockholders. And when the risk-adverse stockholders are holding more than 50% of the company's stock the board is going to pretty much have to go along with this new strategy or get replaced with people that have the proper respect for the pension fund's money.

This is what we have gotten ourselves into today, pretty much worldwide. By letting the pension funds in the door - heck, we encouraged them with special road shows tailored to the "institutional investors" - we have made sure that high-risk projects and products are just never approved.

Re:When was it made illegal? (1)

petsounds (593538) | more than 2 years ago | (#39444789)

Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars.

And how exactly is this different from every election campaign? You could consider every campaign contribution an "investment" (corporations certainly do), and your "return" is the policies you want enacted. And the individual investors in these political candidates almost invariably get tricked.

Re:When was it made illegal? (2)

LehiNephi (695428) | more than 2 years ago | (#39443511)

Crowdsourcing is not specifically illegal, but there are many regulations and laws which apply to companies that allow investments. For a small business, these regulations can be enormously onerous--rules for how finances are tracked, requirements for independent auditors, etc. Mostly, this bill waives the requirements for such a small business for the first few years. I think there's an assumption that the company will either die out in that period or become large enough that it can afford those regulatory expenses.

Re:When was it made illegal? (1)

jfengel (409917) | more than 2 years ago | (#39443523)

The laws were put into place to discourage fraud. If you want to get people to invest in your project, you need to go through a formal prospectus. Otherwise, it's easy to promise people the moon and return nothing. It goes back to the founding of the SEC in the 1930s, and additional legislation passed since then.

The success stories for Kickstarter are inspiring, but the potential for ripoffs is enormous. You need to know just what it is you're buying into. The amount of money that can be lost to fraud is comparatively small, but it's still as much as $10,000, and a lot of people can't afford to lose that. Especially the ones most likely to make desperate, ill-informed choices when somebody promises them enormous returns.

Re:When was it made illegal? (1)

Bengie (1121981) | more than 2 years ago | (#39444281)

When you give money into a KickStarter project, you are in the exact same boat, except you aren't allowed to treat your donated money as an investment, outside of the good generated.

If they pass this, then at least I would have a *chance* at getting a return on my money. When given the choice between a $100 "donation" and a $100 "investment", but both ways I get a video-game out of it, I'll take the investment.

Re:When was it made illegal? (1)

TheSync (5291) | more than 2 years ago | (#39444501)

The laws were put into place to discourage fraud. If you want to get people to invest in your project, you need to go through a formal prospectus.

In most start-ups, the risk of business failure is thousands of times greater than the risk of fraud!

I would love to know whether the rules in place provide enough fraud reduction benefit to make up for the costs of the registration. You should be required to say "YOU ARE LIKELY TO LOSE ALL YOUR MONEY" to investors, anything else is unlikely to be of much benefit vs. cost.

Re:When was it made illegal? (1)

camperdave (969942) | more than 2 years ago | (#39444561)

Fraud? Invest? Prospectus? Returns? Money? I thought we were talking about crowdsourcing: Getting a crowd of people to perform a task. Wikipedia is crowdsourced. Asking Slashdot is crowdsourcing. Even the Ansari X-prize competitions and the DARPA challenges are crowdsourcing. No money changes hands (mostly). No investment takes place.

Re:When was it made illegal? (0)

billcopc (196330) | more than 2 years ago | (#39443535)

Because it's over the "internet", and that scares the living daylights out of the illiterate proto-humanoids we westerners call "senators".

Perhaps K street was feeling threatened.

Re:When was it made illegal? (1)

nedlohs (1335013) | more than 2 years ago | (#39443783)

They has "internet" in the 1930s?

Al Gore wasn't even born, that impossible!

Re:When was it made illegal? (2)

mcmonkey (96054) | more than 2 years ago | (#39443583)

Why was Profiting from Crowdsourcing a movie, song, or book made illegal? And when did it happen.

My question as well. Follow the crowd sourcing link in TFS. It's actually not just a link to a wikipedia entry defining crowd sourcing.

As Amy Cortese writes in the NYTimes:

Under those laws, crafted largely in the 1930s, the sites would have to either limit the fund-raising to wealthy investors, who the S.E.C. deems sophisticated, or go through a registration process that would prove too costly given the small sums being sought

Re:When was it made illegal? (1)

cpu6502 (1960974) | more than 2 years ago | (#39443717)

"SEC registration... too costly". Yeah okay. That figures. I won't be surprised if RIAA and the other megacorp content types try to kill the amendment to this bill. (Gotta protect their outdated model and money.)

investing in a private company is illegal (1)

peter303 (12292) | more than 2 years ago | (#39444651)

Not crowdsourcing, Because many startups and private companies do not publish full annual financial reports, the SEC figures you could get screwed by lack of information.

Boom & Bust (0)

Anonymous Coward | more than 2 years ago | (#39443407)

Well... at least we know what will cause our next economic bubble and inevitable collapse.

Re:Boom & Bust (4, Informative)

LehiNephi (695428) | more than 2 years ago | (#39443531)

I suspect you're not familiar with the specifics of the bill--it limits how much an individual can invest in such a company--only up to 10% of their income or $10k (whichever is less) in the less-restrictive version of the bill. It ain't gonna make any investor go bankrupt who isn't headed there already.

Re:Boom & Bust (1)

characterZer0 (138196) | more than 2 years ago | (#39443573)

It ain't gonna make any investor go bankrupt who isn't headed there already.

Better for them to go bankrupt giving their money to overseas scammers running shell companies in the US that will launder money out of the country than giving it to overseas scammers running shell companies in Nigeria.

Wait.

Uhm... (1)

Black Parrot (19622) | more than 2 years ago | (#39443461)

This bill is about a *lot* more than crowdsourcing, and not everyone thinks most of it is a good idea.

Scam? (5, Interesting)

koan (80826) | more than 2 years ago | (#39443475)

"Of course, supporters don’t describe it that way. They say the JOBS Act — for Jumpstart our Business Startups — would remove burdensome regulations that they claim have made it too difficult for companies to raise money from investors, impeding their ability to grow and hire.

Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness. "
https://www.nytimes.com/2012/03/11/opinion/sunday/washington-has-a-very-short-memory.html?_r=3&partner=rssnyt&emc=rss [nytimes.com]

Re:Scam? (1)

koan (80826) | more than 2 years ago | (#39443657)

Laugh... you modded down the NYT?

Re:Scam? (1, Insightful)

Anonymous Coward | more than 2 years ago | (#39443771)

"...the JOBS Act — for Jumpstart our Business Startups - would remove burdensome regulations...

Never mind that reams of Congressional testimony, market analysis and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been at the root of all recent bubbles and bursts — the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness. "

I was not aware that Enron, Lehman Brothers, Fannie and Freddie, and the large corporate banks involved in mortgages were considered "start ups". Thank you for educating me on that.

Re:Scam? (3, Interesting)

cpu6502 (1960974) | more than 2 years ago | (#39443807)

During George "duh" Bush's administration the number of regulations increased from 110,000 to 150,000 pages. The New York Times must be using a definition of the word "deregulation" that I am not familiar with, because I would call a ~50% increase in regulations the Exact Opposite of deregulation.

I cannot comment of the dot-com or enron debacles, but it is very clear to me the mortgage bubble was created by the Government, its Fannie/Freddie organizations, and the private bank monopoly known as the Fed. They colluded with one another to provide tons of cheap low-interest loans, and that fueled the rapid rise in demand for limited housing, and eventual burst of the bubble in 2007-8. If anything it was TOO MUCH regulation (Congress insisting everyone should get a mortgage, even if they were too poor to pay it back).

Re:Scam? (1)

koan (80826) | more than 2 years ago | (#39443877)

"Bush's administration the number of regulations increased from 110,000 to 150,000 pages."

What kind of regulations? Where is your source information? Following your theory on a government caused collapse in the housing market meant they would have been complicit in removing the very regulations that prevented.

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html [pbs.org]

Re:Scam? (1)

cpu6502 (1960974) | more than 2 years ago | (#39443965)

At work they block most of the web, so I cannot access my usual links (for sources). Sorry. But it's pretty obvious that the Housing Bubble was caused by mortgages that were too easy to get, and the reason they were too easy to get is because the Congress and also the HUD secretary dropped the minimum qualifications to almost nothing. Everyone could get a mortgage. That created the boom. (And booms are always followed by busts.)

Re:Scam? (1)

koan (80826) | more than 2 years ago | (#39444239)

Re:Scam? (0)

cpu6502 (1960974) | more than 2 years ago | (#39444365)

I already did.

Listening to PBS is about as worthless as listening to FOX or CNN or Microsoft NBC (controlled by the defense corporations). The plain truth is that even if Glass-Steagall were still in effect, it would not have prevented the housing bust in 2008. We'd still be in the same situation..... maybe a little better but not by much, because when you have a major market like housing collapse, there will be wide-ranging damage.

Oh and here's a link I just found that shows how Bush REGULATED, not deregulated (as I said in my original post): http://reason.com/archives/2008/12/10/bushs-regulatory-kiss-off [reason.com]

Re:Scam? (0)

Anonymous Coward | more than 2 years ago | (#39444477)

Glass-Steagall is only one portion of the puzzle. It is why we have high commodities prices right now.

It would cut the knees off of hedge funds. As they are playing the market both ways. Long bets and short 'safe' ones. The GS part would make going long a more calculated prospect. The money for the loans was 'created' using these very ideas. The money for the .com bust and housing one did not just magically appear...

They nearly put us under in 1997/1998. But the fed moved in and 'fixed it' fast enough that no one really noticed it. The next 2 people noticed.

GS was invented to take the sting out of the swings and make them smaller and not great depression style ones.

Re:Scam? (1)

cpu6502 (1960974) | more than 2 years ago | (#39444015)

BTW if Glass-Steagall were still in effect, would it have prevented the housing bust in 2008? No. We'd still be in the same situation..... maybe a little better but not by much, because when you have a major market like housing collapse, there will be wide-ranging damage.

Oh and here's a link I just found that shows how Bush REGULATED, not deregulated:

http://reason.com/archives/2008/12/10/bushs-regulatory-kiss-off [reason.com]

Re:Scam? (1)

koan (80826) | more than 2 years ago | (#39444377)

Those regulations were the pure unadulterated stupidity of the Bush family genes.
https://en.wikipedia.org/wiki/List_of_George_W._Bush_legislation_and_programs [wikipedia.org]
That man was and is an abject failure at everything he does.

In regards to the Glass-Steagall act::

This article speaks of how Glass-Steagall limited the size of financial institutions and how the law does not apply in Europe, but it ignores the protection that it provided to our domestic banks and insurance companies. The biggest crisis was the collapse of our banks, not our investment bankers. Banks provide the life blood of our economy - liquidity. That liquidity is protected by the FDIC and the strict rules imposed on banking that prohibited banks from leveraging deposits with risky investments. Glass-Steagall prohibited investment bankers from accepting deposits. Gramm-Leach-Bilely Act of 1999, made significant changes to Glass-Steagall. The act repealed the Glass-Steagall Act's restrictions on bank and securities-firm affiliations. It also amended the Bank Holding Company Act to permit affiliations among financial services companies, including banks, securities firms and insurance companies. Thus the mergers of banks and financial institutions began in 1999 creating these monsters that grew too big to fail. Glass-Steagall may not have stopped a crisis, but it sure would have slowed it down and reduced the scope of damage. The article says that to prevent a future crisis financial institutions should be required keep a good chunk of loan obligations on their own books. I disagree because keeping loans on the books does not guarantee sound underwriting when non-deposit assets from non-banking services can be leveraged with riskier loans. Under Glass-Steagall, bank deposits must be protected with conservative investments which provides better assurance of good underwriting procedures. Likewise for life insurance companies that must maintain a large portfolio of investment grade debt instruments. In addition, the rating agencies themselves should be regulated and audited regularly by the SEC. The SEC should be overhauled to prevent its employees, especially its executive employees, from getting too cozy with Wall Street firms. Glass-Steagall should be re-enacted. Investment banking, banking and insurance should be segregated to adequately diversify the risks or our financial institutions.

Which makes the case for even stronger regulations and oversight.

Re:Scam? (1)

cpu6502 (1960974) | more than 2 years ago | (#39444581)

Oh I see. You're one of those who think Clinton and Obama are angels on earth. I suspected. In reality they are no better than the Republicans (puppets of their corporate funders). Especially Obama who I think is a pro-war, pro-corporatist neocon.

Re:Scam? (1)

del_diablo (1747634) | more than 2 years ago | (#39445267)

Good flamebait, he is not even adressing anything about the Democrats. He is merely stating the fact that Glass Steagall WORKED.
So stop being a angry troll and get some sunlight.

Re:Scam? (1)

timeOday (582209) | more than 2 years ago | (#39443983)

I disagree with you on the causes of the crisis. But that aside, how would crowdsourcing actually work? It is different than micro-loans, because you agree ahead of time exactly what your return will be. Hollywood is driven largely by royalty and profit-sharing agreements, and has become famous [wikipedia.org] for legally screwing people out of what they thought they were entitled to. If I send somebody $5000 for a share in some new website, but they're the only ones who know how many shares they're selling and they alone decide how much "profit" they're making (because there are no independent audits of the finances), aren't I really just signing up for however much they decide later to let me have?

Re:Scam? (1)

datavirtue (1104259) | more than 2 years ago | (#39444585)

No, it was mandated loans AND the fruits of deregulation.

Crowdvesting (0)

Anonymous Coward | more than 2 years ago | (#39443487)

I find your proposal interesting. With the resources that a large group of people can martial we can accomplish things that no individual alone could do. What could we call this group of like minded individuals, each seeking to invest funds for a share in the profits? I have it! We'll call it a corporation.

Regards,
Jason C. Wells

Re:Crowdvesting (0)

Anonymous Coward | more than 2 years ago | (#39443591)

I find your proposal interesting. With the resources that a large group of people can martial we can accomplish things that no individual alone could do. What could we call this group of like minded individuals, each seeking to invest funds for a share in the profits? I have it! We'll call it a corporation.

Regards,
Jason C. Wells

Good Sir,

You are heretofore approximately two hundred and ninety five years postrelevant.

Sincerely,

John Law
Biloxi, Louisiana Colony
Ask me about how you can get your hands on some
gorgeous, ridiculously profitable swampland today!

Outdated information (5, Interesting)

TubeSteak (669689) | more than 2 years ago | (#39443513)

http://news.cnet.com/8301-1001_3-57402589-92/jobs-act-clears-senate-one-step-from-becoming-law/ [cnet.com]

The JOBS Act has passed the Senate. In a 73 to 26 vote today, an amended version of H.R. 3606, which opens startup investing to individuals ("crowdfunding") and gives young companies more flexibility in filing to enter the public stock markets, cleared what is probably its last major hurdle before becoming law.

I'm really surprised that it passed the Senate as the JOBS act is chock full of poorly thought out deregulation.
It's so bad that the head of the SEC has come out against it [washingtonpost.com] and State securities regulators are against the bill [reuters.com]

If this bill becomes law, it'll directly lead to the next wave of investor fraud.

Re:Outdated information (2)

Tanktalus (794810) | more than 2 years ago | (#39443599)

To be fair, you may be talking about some of the people who best know the world of investment finance, but they also have a vested interest in opposing deregulation: it removes some of their power. They no longer have oversight over something, and that is generally a scary proposition for people in power.

This doesn't mean they're wrong, merely that you have to evaluate their statements in the context of their positions. As you should do for investment bankers who might be in favour of the change.

Re:Outdated information (1)

fishybell (516991) | more than 2 years ago | (#39443737)

While I 100% agree that this is a formula for investor fraud, it does have some significant safe guards to prevent a people wiping out someone else's savings with a scam. From the NYTimes link provided in a previous post:

The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

Investors with annual income or net worth of more than $100,000 could invest up to $100,000 or 10 percent of annual income, the Senate amendment states. The amendment also requires companies to disclose more financial results as they increase the amount of money they intend to raise.

Considering how many pump and dump stocks bilk people out on the stock market, with no caps on how much the company can earn or how much someone can invest, I think this is a slightly better alternative way to get scammed.

Re:Outdated information (1)

nnnnnnn (1611817) | more than 2 years ago | (#39444371)

How does regulation or the SEC protect you? How did it protect Madoff investors, or Enron Or Worldcom or Solyndra or WaMu or Lehman investors for that matter? All regulations do is make the barrier to entry so high that only the big companies get funded, while everyone else doesn't. If I want to invest in a garage tech company, how will regulations protect me? It won't. Regulation will only make compliance so expensive that garage tech companies will never get funding, only large companies will.

If a company is irresponsible and is loosing money and committing fraud, the government will be the last to know about it. Meanwhile, no one will do due diligence since everyone thinks the government is doing their job. We don't need a government nanny who don't understand the businesses they are nannying.

This bill is a terrible idea (4, Insightful)

AcidPenguin9873 (911493) | more than 2 years ago | (#39443541)

This bill reduces oversight, regulation, and investor protection measures when companies want to raise investment capital. Please read the following:

http://baselinescenario.com/2012/03/20/cfa-institute-against-the-jobs-bill/ [baselinescenario.com]
http://baselinescenario.com/2012/03/21/jobs-disaster-looms/ [baselinescenario.com]
http://baselinescenario.com/2012/03/22/last-ditch-attempt-to-save-a-little-bit-of-investor-protection-in-the-united-states/ [baselinescenario.com]

One of the biggest cause of the recent financial crisis was too little regulation of the financial industry. I do *not* want to do it again in 5 years.

Re:This bill is a terrible idea (1)

Black Parrot (19622) | more than 2 years ago | (#39443621)

One of the biggest cause of the recent financial crisis was too little regulation of the financial industry. I do *not* want to do it again in 5 years.

Don't worry... in 5 years we still won't be recovered enough for another crisis.

Re:This bill is a terrible idea (1)

jeffmeden (135043) | more than 2 years ago | (#39443865)

This bill reduces oversight, regulation, and investor protection measures when companies want to raise investment capital. Please read the following:

http://baselinescenario.com/2012/03/20/cfa-institute-against-the-jobs-bill/ [baselinescenario.com]

http://baselinescenario.com/2012/03/21/jobs-disaster-looms/ [baselinescenario.com]

http://baselinescenario.com/2012/03/22/last-ditch-attempt-to-save-a-little-bit-of-investor-protection-in-the-united-states/ [baselinescenario.com]

One of the biggest cause of the recent financial crisis was too little regulation of the financial industry. I do *not* want to do it again in 5 years.

The only crisis you don't want to have happen is the one you don't see coming... If this is as plain-faced as many out there think it is, what is the worry? Wait for the momentum to pick up, then bet big against crowd-vesting. Then, sit back and watch your millions roll in!

Re:This bill is a terrible idea (1)

MickyTheIdiot (1032226) | more than 2 years ago | (#39444427)

I happen to believe that the deregulation of the banks was A if not THE major cause of the collapse we saw in 2008, however the question isn't whether all regulation is bad or all regulation is good. That's the way the debate is framed in our rock-stupid political discourse and our current dumbass presidential campaign.

The *real* debate should be what regulation is appropriate in what situation. When you talk about over-regulation of small business most people have a good point. Small business can't bring down the economy and small businesses individually don't have much political power. When you talk about huge banks with millions of dollars tied up you have a different issue. They have huge power and they could hurt millions of customers.

It's always what is appropriate. If you believe set of ideas fits all situations then you aren't being realistic or you're a professional troll like Rush Limbaugh.

Re:This bill is a terrible idea (0)

Anonymous Coward | more than 2 years ago | (#39444703)

All regulation KILLS JOBS. If you value your ability to feed your kids, you should oppose all regulation. Anyone who says anything different is trying to scam you.

Re:This bill is a terrible idea (0)

Anonymous Coward | more than 2 years ago | (#39444831)

What deregulation?

The rate of growth of rules on the federal register has been positive even throughout the Bush administration. I dare anyone to try to prove otherwise by means of actually looking at this source, instead of using the tedious talking points about deregulation. The truth is regulations have increased in a greater than linear fashion, even in the financial sector of the economy.

Re:This bill is a terrible idea (0)

Anonymous Coward | more than 2 years ago | (#39445223)

AC due to mod points.
I assume you don't work in finance.

I say this because regulation has nearly CRIPPLED our ability to grow as a small business.

The securities agencies don't have enough funding or manpower to enforce most of their regulation. THAT is what caused the meltdowns, NOT a lack of regulation.

Crowdfunding will not work. (0)

Anonymous Coward | more than 2 years ago | (#39443565)

Crowdfunding is a great way for criminals to launder huge sums of money and scammers to attract investment money for schemes.

Re:Crowdfunding will not work. (1)

ZeroSumHappiness (1710320) | more than 2 years ago | (#39443691)

So you're saying it'll be successful? (Remember, laundered money is taxed money.)

How does venture capitalism work then? (1)

amigabill (146897) | more than 2 years ago | (#39443593)

If the average joe is not allowed to get investment in his company, then how do companies with wealthy venture capital investors work? What's the difference?

Re:How does venture capitalism work then? (1)

ZeroSumHappiness (1710320) | more than 2 years ago | (#39443715)

How to get rich in four easy steps:
1. Start off rich
2. Invest your money wisely
3: ???
4. Profit

Wealthy investors can invest without regulation (or at least, limited regulations) because the SEC assumes that wealthy people know how to handle their money.

Re:How does venture capitalism work then? (2)

Voogru (2503382) | more than 2 years ago | (#39443769)

I guess people havent figured out that this is really a scam which enables the already rich to profit even more because they don't have to share the profits with the lower classes.

Of course, if they sold it like that, they couldn't vote for it. So it's instead sold as "We're going to protect you from scammers by making it impossible for you to invest in small startup companies! Don't worry, we'll invest in them and keep all of the rewards for ourselves."

You just keep buying those CD's now.

Remember folks, the laws are created to protect the rich and powerful. Not for the common individual.

Re:How does venture capitalism work then? (2)

TimHunter (174406) | more than 2 years ago | (#39443809)

Now we know better. Ask Alan Greenspan:

Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity — myself especially — are in a state of shocked disbelief.

http://www.independent.co.uk/news/business/analysis-and-features/quotes-of-2008-we-are-in-a-state-of-shocked-disbelief-1220057.html [independent.co.uk]

Re:How does venture capitalism work then? (1)

MickyTheIdiot (1032226) | more than 2 years ago | (#39444457)

Greenspan was in disbelief because he was a blind follower of a bankrupt philosophy.

One of the many major problems of Objectivism is that power corrupts. People won't always act rationally and they will steamroll people just because they can.

Re:How does venture capitalism work then? (0)

Anonymous Coward | more than 2 years ago | (#39444987)

Show me a single time when Greenspan acted out the tenets of Objectivism. Don't cite words that could be simply tossed out while acting the opposite, cite actions, please. I suspect you will have a hard time of it, given his actions were that of a central planner, a leech and a tool of statists.

Also, as a simple deductive counter argument to your claim, statism provides more opportunity for 'steamrolling' than the non aggression principle ever could. The power of freedom of association and mutually voluntary exchange is not to 'steamroll' people. That is an exclusive domain of violence.

Thus, the only bankrupt philosophy is the one employed that has indeed bankrupted us. To suggest that it is Objectivism that is driving our current decline would be to admit ignorance of what Objectivism asserts. The overriding economic philosophy pushing us nearer to ruin is economic fascism(corporatism for those who like definitions that put emphasis on the effect of the problem, rather than the source). I challenge you to demonstrate otherwise.

Re:How does venture capitalism work then? (1)

jeffmeden (135043) | more than 2 years ago | (#39443819)

If the average joe is not allowed to get investment in his company, then how do companies with wealthy venture capital investors work? What's the difference?

There is a small flock of lawyers on either side of the table figuring out how to avoid having their side get (overtly) screwed in the deal, by way of very specific ownership contracts. Since it's not practical to have a lawyer sitting next to the computer everywhere a crowd-vesting purchase is about to be made (it will be a purchase of a share of the profits, not a donation like we currently see with crowdsourcing) it does not seem practical to let "just anyone" solicit funds for ventures of questionable merit on the internet. How will we expect everyday people to be able to tell the difference between a real and fake small t-shirt company on the coast of Louisiana that just needs a few grand to get off the ground with a great idea (that they cant share for fear of being copied)? It's hard enough telling the difference between the real and fake Nigerian Princes out there...

Re:How does venture capitalism work then? (1)

Rude Turnip (49495) | more than 2 years ago | (#39444071)

You're allowed to sell stock or debt in your company as long as you are able to meet certain reporting standards, such that it is harder to rip-off investors. This lowers the bar for disclosure and makes it easier to scam people.

ah, very good (0)

Anonymous Coward | more than 2 years ago | (#39443649)

...allow the common citizen to invest for potential profit...

They're going to legalize online gambling after all.

Re:ah, very good (1)

MickyTheIdiot (1032226) | more than 2 years ago | (#39444463)

It's already legalized. It's called Credit Default Swaps.

And it will NEVER be abused (0)

Anonymous Coward | more than 2 years ago | (#39443669)

This is a big victory for MONEY LAUNDERING! (not to mention graft and prostitution)

Re:And it will NEVER be abused (2)

Voogru (2503382) | more than 2 years ago | (#39443729)

Prostitution should be legal anyway.

Re:And it will NEVER be abused (1)

T.E.D. (34228) | more than 2 years ago | (#39443791)

It is, if you spell it "L O B B Y I N G"

Newsflash (1)

Voogru (2503382) | more than 2 years ago | (#39443699)

The whole point of investment is to risk your capital in order for a return. If you can't afford to lose it, you should not be investing it in the first place. That is the risk you are taking. However if your investment takes off, you will have a very high return. So if you lose $10,000 in ten different 'investments', and then some of your next $10,000 investments take off and become the next home depot, you're still way ahead of the game.

These laws that prevent people from investing in small startups ends up hurting them, because now what happens is all of the expansion happens and then they finally create an IPO and there is not as much growth for them to profit from. How many IPO's have you seen under 50 million dollars?

Very few.

If you want risk free money, get a CD and enjoy the negative returns.

Tor BB for Linux (2.2.35-8) "EVIL bug" NEVERFORGET (-1)

Anonymous Coward | more than 2 years ago | (#39443813)

##
                  Tor Browser Bundle for Linux (2.2.35-8) "EVIL bug"
                                                  *** NEVER FORGET ***
#
- http://seclists.org/bugtraq/2012/Mar/85 [seclists.org]
- http://www.securityfocus.com/archive/1/522003/30/0/threaded [securityfocus.com]
#
"There is an EVIL bug in at least the Linux (2.2.35-8) Tor Browser Bundle start-tor-browser script. It will log things
like domain names to a file in the root of the browser bundle."

https://trac.torproject.org/projects/tor/ticket/5417 [torproject.org]

Ticket #5417 (new defect)

RelativeLink.sh in Tor browser bundle has small typo causing debug mode to be always turned on

Reported by: cypherpunks
Priority: critical
Component: Tor bundles/installation

Description

TBB starts in debug mode disregardless of --debug switch used or not. This is caused by small bug on line 208 on
RelativeLink.sh, where it says

if [ "${debug}" ];

where it should say

if [ "${debug}" == 1];

or

if [ ${debug} -eq 1 ];

#
Thank you for the warning. I expected something like this to happen, given the last slip up with a mistake in FF versions. This, "error", if you wish to call it such, shouldn't have happened. Again, this is a lack of testing.

I hope no one in Iran, China, or other freedom starved regions were screwed because of this.

I hope a fix is released and quickly.

These mistakes should be posted in the Tor announcements mailing list (no announcements at all since Dec/11 is pathetic) and on the blog.

It would help Tor users even more if you were to actually create web forums for discussions (but I doubt you will, we've only been asking for this for years!) where you could sticky-pin these types of mistakes and communicate better with the broad range of users.

A large number of people will never use a bug tracker, and/or never use mailing lists. They are simpler minded people or too busy, this is where web based discussion forums come in. Users should not have to scramble to unofficial .onion forums which are up one day and down the next and which may (and have in the past!) contain malicious posts/threads to target the user's browser and/or Tor itself.

With errors like this, perhaps you should let Mickey Mouse sign the future Linux release bundles with his fictional GPG key. He couldn't do any worse.

I've also noticed FF crashing more often since the last few releases.

I guess it's time for us Linux bundle users to run W.I.N.E. and the Windows version of the bundle on Linux so we know we are not getting borked with some new fantastic bug or lack of oversight like this again.

But will this post be approved for others to see, or swept under the rug like one previous post about a similar issue.

Now I'm looking forward to the next release, not for use, but just to see what type of bug(s) it may contain. THANKS!

#
Nick Mathewson
Mon, 19 Mar 2012 09:40:43 -0700

It seems that a fix was merged yesterday: see
https://trac.torproject.org/projects/tor/ticket/5417 [torproject.org] and
https://lists.torproject.org/pipermail/tor-commits/2012-March/041036.html [torproject.org]
.

I bet there will be new TBBs out very soon.

In the meantime, Linux users should delete vidalia-debug-log and
symlink it to /dev/null. (Haven't tested that, but it should work:

    % ln -sf /dev/null /path/to/vidalia-debug-log
    % ls -l /path/to/vidalia-debug-log

    lrwxr-xr-x 1 username username 9 Mar 19 11:53 vidalia-debug-log
-> /dev/null .)

IMO, this is a really good reason for us to move to getting enough
automation done so we can have nightly TBB builds and catch this kind
of thing *before* actual releases come out.

--
Nick
#
Sebastian Hahn
Tue, 20 Mar 2012 02:20:08 -0700

The bug in TBB is quite severe, and it is against its stated goals and
design principles (one of which is leaving no/as little traces as
possible on disk for later forensics). This bug was severe, it was fixed
quickly, and hopefully nobody was impacted too much. Time to move on.
#
Read and archive these also (to record history for this "EVIL bug":

https://lists.torproject.org/pipermail/tor-commits/2012-March/040941.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/040942.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/040939.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/040945.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/040950.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/040952.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/040953.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041036.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041037.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041038.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041039.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041040.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041043.html [torproject.org]
https://lists.torproject.org/pipermail/tor-commits/2012-March/041056.html [torproject.org]
##
History won't recall this bug and the severity of it unless you
archive this information and the information at the links issued above.

Sweet (0)

Anonymous Coward | more than 2 years ago | (#39443831)

I've been authorized to lease out the Brooklyn Bridge, and fund the first viable cellousic ethanol plant in the Cayman Islands. If your capital needs to be put to better use, I'll take real good care of it.

For a minute I thought I might have to change (0)

Anonymous Coward | more than 2 years ago | (#39443891)

For a minute I thought I might have to change one of my investment rules:

Good investments don't advertise.

There are some exceptions of course, such as good CD rates advertised by banks. Good businesses may also occasionaly advertise an issue of shares in the WSJ. In general the rule applies to things that you never heard of before that are being advertised as investments. The classic example is the "high yield investments" you see in local pulp newspapers and ad flyers. It's not unusual for these to end badly. They're most likely junk bonds being sold outside the usual chanels.

In general these "crowdsourced" investment offerings will come from people who got turned down by VCs or couldn't get VC money. Think about that. If you had enough money you might be able to diversify your crowdsourced investments and come out ahead. That's assuming that the typical crowdsource funded startup does well. I'm willing to wager (by not wagering) that the typical crowdsourced startup does worse than the traditional angel/VC startup.

Yes. You will hear some success stories. It's just like the lottery parading their winner on camera, or the Indian casino running the commercial with the smiling $100k winner at their slots. Averages, people. Averages. That's what matters.

Sounds like an awful idea (1)

cdrguru (88047) | more than 2 years ago | (#39444497)

The idea that someone can become an investor - and start thinking they are going to have input into the operation of their investment - without having any knowledge of what they are investing in is a sure road to disaster.

Unfortunately, the disaster isn't just for stupid investor that puts some money into something relatively blindly and then regrets it. Oh no, if it was just that the limits on how much money might be OK. No, the trouble starts when J.B. Moneybags shows up on the doorstep of what he invested in and thinks (ignoring all statements to the contrary) he should have some input now. Of course, if the guy really had lots of money to invest he would have done things sensibly (maybe). But what you are looking at is a guy who wants to get in on the ground floor of something and is sure he knows more about running the business than the people who started it.

Oh, and of course if you don't listen to him he will sue. Might take a while to find a lawyer that will take the case, but he will end up suing. Which will eat up every bit of whatever he invested in legal fees and court time. And probably a lot more money than he invested to go along with it.

No, if you haven't had a investor you probably do not understand. But anyone with a past or present investor knows exactly what this is about and wants nothing to do with it at all. Some people are going to get burned by this - the investors that deserve it and the start-up guys that do not.

Ordinary Americans Shouldn't be Allowed to Invest (1)

sp3d2orbit (81173) | more than 2 years ago | (#39444665)

Until Americans get much, much better at basic mathematics and risk management in general, it is foolish to allow the average person to invest in a venture capital manner -- and history is a guide as too why.

During the years 2000 - 2007 millions upon millions of Americans took out first, second, and third mortgages to invest in real estate -- a tangible product that historically is a good investment. They all signed loan documents containing something called "The Truth in Lending Act" disclosure that says in very clear, very understandable terms "You are being loaned money at 1-2%. Your interest rate can eventually increase to 7-8%. This loan may cost you WAY more than you can ever afford to repay." Everyone who signed a loan document during those years saw that document, saw the possibility that they could get screwed, and said "I'm going to get rich".

When the bottom of the market fell out people didn't blame themselves for ignoring the Truth in Lending Act disclosure. They didn't blame themselves for ignoring the mathematics behind interest rates and monthly payments. They didn't blame themselves for not having money management skills and avoiding overextending themselves. Instead they blamed the bankers and society in general. Way easier.

If the average person is allowed to invest in venture capital schemes then a lot of them are going to lose their asses because most businesses don't work out. Until we live in a society where it is no longer OK to say things like "I just don't understand math" then it is not OK to allow those same people to risk their savings on long shot gambles. Because, as we have already seen, society will inevitably have to bail those same people out when things go bad.

Re:Ordinary Americans Shouldn't be Allowed to Inve (1)

AvitarX (172628) | more than 2 years ago | (#39445117)

The only people I know that did that, did blame themselves (I know 3).

The reason the banks got blame is that they made lots and lots of these loans, knowing people would not be able to pay them back if they didn't get rich. The banks allowed themselves to get taken down too, which damaged far far more people than simply the ones being stupid.

The banks could have stopped it, a single borrower could not. The situation for any individual borrower is their fault, but the fact that lending dried up over-all and the economy dipped hard is the fault of the banks.

otherwise called the "FACEBOOK" bill (1)

peter303 (12292) | more than 2 years ago | (#39444679)

Plenty of small investors were angry they cant invest in Facebook until it is fully public. This bill is a way around that.

I smell a bubble (1)

NicknamesAreStupid (1040118) | more than 2 years ago | (#39444939)

It smells sweet, looks beautiful, and floats effortlessly, too. Bounteously round and enticingly transparent, it seems to be the perfect investment vehicle. That means many people will follow it mindlessly and pour billions in until the bubble bursts into flames and crashes. God Bless America!

A Threat to the Banksters (1)

jr0dy (943553) | more than 2 years ago | (#39445239)

I am sure there are some pretty powerful lobby dollars out there fighting against this, as banks will definitely want to maintain barriers to entry to the lending market.
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