35 posts categorized "Occupy"

The Student Debt Noise Brigade

I had heard from my daughter that this is happening, but hadn't seen it for myself until a couple nights ago.

A group of students has organized a weekly Wednesday evening march to protest what they see as oppressive student loan debt, that 21st-century version of indentured servitude, you might say.

I think it's really healthy to see students looking for other paradigms to understand the bind they are in. Those of us not in school but invested in the future viability of our innovation economy ought to pay attention. I'm not saying we all should agree with how these particular students are framing the issue. But I am saying I'm glad they are re-framing it. That's what educated people do: question assumptions; collaborate to fix things that aren't working.

The depressing healthcare thing, now as politically polarized as abortion, is impressing upon me that my country remains way, way more conservative than you would assume would be the norm in a modern democracy. Something doggedly regressive seems to be in the very warp and weave of progressive America. We may have to conclude that healthcare is something more like a yacht, or a ski vacation home in Aspen, Colorado: an attribute of the lifestyle of the successful and the wealthy. (I know some made the argument, early in the Startup America process, that universal healthcare would be a way to support entrepreneurs, but I don't think that argument ever got traction.)

But surely education isn't toxic like healthcare? If the spoils at the end of the day must needs go to the rich and successful, shouldn't everyone have access to the game at the front end? I have to believe the country can find a progressive consensus about that.

The Student Debt Noise Brigade

The Student Debt Noise Brigade

More on Free Speech & the JOBS Act

Follow up to Staurday's post: looks like Jonathan Massey's and Laurence Tribe's petition was denied.

This page from the US Supreme Court's website indicates that a few more briefs were filed, but the Court made a decision last month to not hear the case.

Here's an interesting excerpt from one of those additional briefs, filed by the Cato Institute:

"[T]here is an emerging consensus that . . . general solicitation bans have outlived their usefulness, if they ever were useful. . . .

"As the House of Representatives has noted, 'This prohibition on general solicitation and advertising has been interpreted to mean that potential investors must have an existing relationship with the company before they can be notified that unregistered securities are available for purchase. Requiring potential investors to have an existing relationship with the company significantly limits the pool of potential investors and severely hampers the ability of small companies to raise capital and create jobs.'

"Members of Congress of both parties have acknowledged that the general solicitation ban is undermining the goals of transparency and efficiency in capital markets, by limiting the ability of startup entrepreneurs to communicate truthful information about their products to investors and the public. They have recognized that the ban is thwarting the beneficial use of new technologies such as social networking to help entrepreneurs gain the access to capital they need to keep their businesses growing. . . .

"On Nov. 3, 2011, these legislators joined in a successful bipartisan vote to pass H.R. 2940, the 'Access to Capital for Job Creators Act,' which would repeal the SEC’s general solicitation ban and modernize the securities laws to reflect the existence of the Internet and electronic communications. . . .

"The House’s overwhelming recommendation that the ban on general solicitation be repealed undercuts the argument that such bans promote important government interests or that such interests cannot be achieved in less speech restrictive ways. . . ."

The brief appears to have been filed on March 5, before the JOBS Act passed. Of course we now know that the lifting on the ban on general solicitation and general advertising is a key feature of the JOBS Act, now law, awaiting SEC rules before taking effect.

In one sense, the First Amendment arguments about general solicitation and general advertising are moot, given the Rule 506 reform mandated by Title II of the JOBS Act. However, I think these arguments may be ones to revisit, if and as the equity crowdfunding exemption gets mired in the ban on the exchange of open information that Congress has imposed in Title III of the JOBS Act.

Supreme court

Photo of US Supreme Court building from the Library of Congress / Flickr.

Free Speech & the JOBS Act

Some four months ago, lawyers Jonathan Massey and Laurence Tribe filed a provocative petition with the US Supreme Court. The "petition" takes the form of a brief or memo, which identifies constitutional free speech and due process concerns raised by securities laws that ban general solicitation and general advertising.

Screen shot 2012-06-09 at 10.08.11 AMThe federal securities law ban on general solicitation and general advertising - at least the one pertaining to offerings made in reliance on Rule 506 of Regulation D - is going to be overturned, of course, thanks to the JOBS Act (the SEC has yet to write the implementing rules). So in that respect, you might presume that the Massey/Tribe brief is moot, in terms of its larger resonance beyond the given case it addresses.

But that's not so. The petition - or the argument of the brief itself, really - is timely, providing a different lens on the JOBS Act. A useful lens. You walk away from reading the brief, better recognizing the paternalism that the Senators who drafted the equity crowdfunding exemption just couldn't get past.

A case before a court usually involves a specific fact situation. Changes to the law, if any, wrought by a court decision will usually be wrought in the context of deciding a particular case among particular parties. That's the situation here, too. I don't mean to imply that there is anything about the case Massey and Tribe are briefing that asks the Court to address the JOBS Act.

At the same, the implications of their arguments are not lost on the brief writers and they do indeed see the given case as a vehicle ("This case presents an excellent vehicle for this Court to address the First Amendment as it extends to laws restricting speech surrounding the marketing and sales of financial products and services"). Massey and Tribe also think specific Justices will be interested in some technical jurisdictional issues presented.

Here's an excerpt from the brief that summarizes a key argument with resonance for the JOBS Act:

"This Court should . . . grant certiorari to review the audience-based discrimination inherent in the Massachusetts ban [on general solictation and general advertising] as applied to [the financial firm] Bulldog. There is no dispute that Bulldog is permitted to distribute the identical materials to accredited and financially sophisticated investors who certify themselves as such, or to investors with whom Bulldog has a prior relationship so that it is aware of their financial situation. Ironically, the only people to whom Bulldog is not permitted to supply the information are the very people who cannot act on it to buy securities . . ."

"Moreover, the state’s prohibition on speech discriminates according to the financial status of the audience. A selective 'rich readers only' rule is precisely the kind of paternalistic snobbery that this Court has repeatedly condemned in commercial speech cases . . . ."

As noted above, the JOBS Act seems to resolve this free speech problem at a federal level. As long as a startup or emerging or other company can otherwise meet the requirements of Rule 506, the "rich readers rule" would have been overturned, and the point of discrimination would occur at the purchase of the securities, not in the offering of them. (Again, this JOBS Act resolution is not yet implemented; the SEC needs to write the rules, and those rules are going to impose new requirements for "verification" of the accredited status of the purchasers, at least when general solicitation or general advertising has been used.)

But how does the dogged paternalism of the equity crowdfunding exemption in the JOBS Act look in this light?

ProspectusThe crowdfunding portion of the JOBS Act states that an isser relying on the equity crowdfunding exemption "shall . . . not advertise the terms of the offering, except for notices which direct investors to the funding portal or broker." Contrast this with the provision in the original, McHenry equity crowdfunding bill, which had admonished issuers to make "available on the issuer's website a method of communication that permits the issuer and investors to communicate with one another."

McHenry wanted information about crowdfunded offering to be open to crowdsourcing. The Senate version of crowdfunding, the one that passed and is in the JOBS Act, wants a classic, top-down prospectus (it just so happens to be a prospectus on a website, with the interactivity made possible by the web de-activated).

To borrow a phrase Massey and Tribe use to describe the Massachusetts ban on general solicitation and general advertising, the centralization and control of information required by the equity crowdfunding exemption of the JOBS Act is an "anti-disclosure rule." It follows from a mindset that the law should "protect the weak, the uninformed, the unsuspecting, and the gullible from the exercise of their own volition" (quoting from an old Supreme Court case cited in the Massey/Tribe brief).

In the Bulldog case, a state court had found that "Bulldog's proposal to concentrate enforcement at the point of sale rather than at the offer stage increases the risk that enforcement will come too late to prevent the harm or permit monetary recovery." That may also be a fair summary of the Congressional rationale to take the crowdsourcing of information out of equity crowdfunding.

Accredited investors will suffer no such proactive "prevention of harm," of course. Angel investing will be fine - better than ever - thanks to the JOBS Act. (In addition the the lifting of the ban on general solictation and general adverstising, Title II of the JOBS Act also gives the angel community a new safe harbor for online and other activity.)

But democracy, free speech, the ability of the average American to participate in the economy with her dollars, those principles are not actually reflected in the crowdfunding exemption of the JOBS Act.

Thanks to David Fisher for alerting me to this blog post by Jenny Kassan, which discusses the case and links to the brief.

Photo of old prospectus: John Spooner / Flickr.

Easter Morning Thoughts About Crowdfunding & Occupy Wall Street

One thing that has disappointed me in recent months has been how the Occupy Wall Street movement, at least as reflected by activists I had followed on Twitter since the occupation of Zuccotti Park last fall, has been distracted by its skirmishes with the NYPD.

No doubt if you are provoked by, and provoking, the police day-to-day, it's natural for those skirmishes to preoccupy your thoughts and distract you from your purpose. But it began to feel to me - from afar, I know - that sparring with police had actually become the movement's purpose.

Lincoln MemorialMeantime, and without using either the tactics or terminology of #OWS, crowdfunding advocates took up the cause of directly confronting Wall Street, by pushing Congress to do something to permit the 99% to participate in private investing.

There is a quintessentially can-do and self-reliant resonance to crowdfunding - you can feel it by spending 10 minutes clicking around Kickstarter (which of course does not do equity crowdfunding, but the energy is there) - that was also a feature of the #OWS movement last fall. With lenders not lending, with access to VCs too difficult and angels sometimes too remote, crowdfunding advocates said, look, let small, local businesses - and startups with ambitions, too - appeal to the public for seed money.

About four months ago, around Thanksgiving, I wrote an imagined speech that President Obama might give to the nation, calling on us to learn from OWS and take steps to fulfill the promise of our democracy in a more direct way. The President did not give such a speech of course. My friend, the US history professor and savvy political decoder Mark Byrnes, told me the President would never get re-elected if he gave such a speech.

But I was there in the White House Rose Garden last Thursday when the President used a phrase with Lincolnian overtones to describe the "big, new pool of potential investors" that the crowdfunding portion of the JOBS Act might usher into the innovation economy. He called this new pool of investors, "the American people."

I've been disappointed by how the McHenry crowdfunding bill, fresh and free of cynicism, was dropped in favor of the Merkley/Brown bill, which went way too far toward putting the crowdfunding paradigm into reactionary frameworks that are second nature to securities regulators and securities lawyers.

But I'm wising up as I continue to see crowdfunding advocates, day by day, working to figure out what to do next. Unlike the VCs, who got their IPO on-ramp, and unlike the angel investors (in the Rose Garden Thursday, the President called them "wealthy individuals"), who got reforms to bring angel investing into the socially networked era, the crowdfunders are not part of the 1%. In spite of that, they got something - imperfect, but something not on the agenda of the 1% - done in Washington DC.

Perhaps without wanting it, maybe the crowdfunders carry the mantle of #OWS now.

Quiet Rooms? Why Talk About Income Inequality Should Be Public

Republican candidate attacks on Mitt Romney for being a successful private equity investor are backfiring.

They are certainly making me sympathetic with Romney, for the first time. On TV, the man has no personal charm whatsoever; but the more that facts about Bain are discussed, the more it sounds like his tenure there was successful.

President Obama is measuring himself against other standards - politician, statesman, author - but Romney's private equity background puts into relief Obama's utter lack of experience in running private businesses to generate returns to shareholders. If Romney ends up being the GOP nominee, we're set up for a national discussion about (to paraphrase a recent NPR story) the meaning of capitalism in America.


Romney is definitely old school, if not actually freeze-dried. I think his "quiet rooms" comment is telling. You can relate the remark to very traditional, East Coast Republican sensibilities of decorum and respect for authority.

But the fact of the matter is that most businesses, even many new startup ventures, treat compensation as a taboo subject, something not to be discussed with employees as a group. With some notable exceptions, the owners, boards and management of most businesses aren't transparent about compensation - their own, nor that paid to employees at large. Payroll details are even regarded as proprietary, competitive information. Inequitable compensation within an enterprise - Sally should be making as much as Bob given x, y and z - is indeed something the appropriate echelon of a company will discuss "in a quiet room."

I don't know that America is ready to imagine itself an "ownership society" (the term was previously misappropriated by the sellers of publicly traded stock, though in that use it never meant actual ownership and control of the thing owned). Perhaps the concept will overtake popular discussion at a time we least anticipate. But I hope the election will extend the discussion about income inequality and political corruption that #Occupy started. Romney's comment, while descriptively accurate regarding the ways businesses operate, is a terrible way to approach laws and policy for the common good. 

The political system needs to be made democratic, so that the voice and the interests of the lowest paid worker are as important to legislators and Presidents of the United States as the voice and the interests of the highest paid CEO. That is not true of our system today. Romney doesn't "get" that at the moment, though it is tantalizing to wonder if his experience may ultimately put him in a better position to appreciate that distinction than President Obama can.

For another view, one framed by political history, on what the attacks on Romney mean, see this post from my friend Mark Byrnes, "Romney, Bain, and the End of the Reagan Coalition."

Flickr photo, "the quiet room at the Reynolds Club," by supafly.

Who's Your Go Daddy?


The problem isn't really Go Daddy or Washington lobbyists or even the MPAA.

Candy-Sugar-Daddy-UnwrappedThe problem is the Congress.

Remember how the patent reform law passed this year addressed the problem of software patents? 

It addressed software patents by ignoring them, except that it didn't ignore them for the banking industry. Wall Street paid Charles Schumer to fix the problem for them, and he did.

I really like this comment from dclowd9901 on Hacker News:

"I think the mature thing to do, as cynical as this might sound, is to realize that the government is obscenely out of touch with its constituency, and stop going to them for help. Instead, influence the influencers.

"At the end of the day, all companies have is customers. If the customers stop utilizing their services, the companies are forced to stop pushing their anti-consumer agendas into legislation. Part of this is utilizing the Internet, as it now is, to circumvent the old ways of doing things.

"Essentially, while it is free, startups should be focusing on helping consumers circumvent traditional industries.

"We all hate banks as they are. Let's reinvent them.

"We all hate telecoms. Let's try to create startups that can compete with them.

"We all hate loan institutions. Let's disrupt the loan structure, allow people to privately invest in one another on a micro scale. Hell, it's already being done for 3rd world nations.

"We have a real opportunity to change things and make them better. Get out from under the institutionalized world we grew up in. Why not?"

I really like the comment and I love the spirit.

But I also think the "why not" is that the influencers will continue to pay the Congress to undermine innovation and stack the deck against the disrupters.

The #Occupiers have tried to make it okay to say at home what we until recently thought was only okay to say about governments in other parts of the world: that no government is legitimate unless it is democratic. It shouldn't be that radical an idea, but it probably will take some getting used to, that we have the right to insist that the government serve the common good and not influencers.

Sugar Daddy Unwrapped from Wikimedia.

Crowdfunding the Revolution

The primary way I keep up with Occupy Wall Street in New York City is through following the tweets of @DiceyTroop.

Washington-at-ValleyForgeI had thought my post this morning would be about an interesting thread of tweets among @DiceyTroop and other occupiers, disagreeing - publicly - about something that happened at the end of a general assembly last night. I thought it was refreshing to see a serious disagreement aired out publicly in a way that wasn't staged. (In this morning's episode of the entertainment/reality series that passes itself for presidential nomination politics, last night's debate moderators were more interested in assessing how effective each campaign's attacks were, tactically, on perceived weaknesses of others, than anything substantive.)

But something more interesting came up as I got to a desktop to try to re-assemble the #OWS tweet thread: I learned that @DiceyTroop is attempting to crowdfund his expenses as an occupier, and more particularly, his expenses as a protester and a chronicler of everything that is happening.

I'm going to support him. I'm not recommending anyone else do the same, unless you already follow him, know him accordingly, and appreciate his reporting.

The revolution will not be televised, because media properties won't take their cameras there, and if they do, they won't air what offends their sponsors. The revolution may be livestreamed, though the recent coordinated evictions raise questions about the national government's sensitivity to images that don't comport with America's self-image as an exporter of democracy. That the revolution may be crowdfunded . . . now there's an interesting new idea.

Washington at Valley Forge" by Edward P. Moran. Library of Congress.

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