I feel betrayed by the JOBS Act
Just a few days ago, U.S. President Barack Obama signed the “Jumpstart Our Business Startups Now” Act, known as the JOBS Act for short. I see a change here in the way we are looking at things, since the beginning of the financial crisis.
The new legislation eases the financial reporting and audit requirements as well as securities markets compliance costs of small and medium size enterprises (SMEs). It is meant to ease access to securities markets for SMEs. Well, that’s some change.
I find it ironic that our new Commercial Code in Turkey is increasing compliance costs for our SMEs, regardless of whether they are issuing securities or not. Look what they are doing in the United States. Last time I wrote about how Koreans feel betrayed by the Greek bailout. Similarly, coming from a tight banking sector, I feel a little cheated by the JOBS act.
Doesn’t anyone remember how the world entered into this financial nightmare? The governments at the center of our civilization eased financial reporting and auditing standards so much that it became impossible to compare banks’ balance sheets. When financial assets are priced in-house rather than in collective markets, balance sheets become unreliable. That is what we found out. That is why banks stopped trading with each other. That is why central banks have become the sole providers of liquidity, and it was why so many banks went bankrupt. It was all because governments permitted a lax reporting and auditing atmosphere to take hold, and informed traders handled securities.
We now know that that was a bad decision. If there are uninformed and informed traders in financial markets, you need some reporting, even for informed traders. Otherwise, the sewage seeps into the drinking water, which is precisely how we got into this crisis. It is not only about subprime lending, but also about securitizing those loans with easy reporting and auditing standards.
We all blamed the bankers in the wake of the crisis. Increasing the strength of the regulatory apparatus was a natural reaction on the part of governments, and the Volcker Rule of 2009 was born as an early response. Compliance costs have been increased since then, but the tide is shifting with the JOBS Act. This is not about strengthening regulatory standards to collect money from the public. It is about easing standards for SMEs.
I feel betrayed because in Turkey, we are trying to enhance our disclosure rules and make corporate accounts more transparent. That is what our new Commercial Code does, mind you. In the U.S., they are opting for more opaqueness so their SMEs can collect public money under the name of lower compliance costs. That is the meaning of the JOBS act, believe it or not.
This is some change, isn’t it?