Allentown Morning Call
Late last year U.S. Sen. Pat Toomey, R-Pa., joined three Democrats in writing three separate but related bills intended to make it simpler for small businesses and startups to access money.
On Thursday, the U.S. House, in a rare showing of bipartisanship, passed legislation that included versions of Toomey’s three bills. Just 23 Democrats voted against the measure. Every Pennsylvania representative supported it.
The bill, named Jumpstart Our Business Startups Act, or JOBS, also earned approval from the Obama White House, which said in a statement, “The president called for cutting the red tape that prevents many rapidly growing startup companies from raising needed capital.”
Toomey, who serves on the Senate banking panel and worked in finance on Wall Street, said he’d been “kicking around” a number of ideas to help business while searching for areas with bipartisan interest.
“I think Dodd-Frank is a disaster,” he said in a phone interview, “but I know the Democrats will circle the wagon around it, so that’s tilting at windmills. There were multiple sources for these various ideas, and it started to become clear that [around] helping small companies raise capital there was broad agreement.”
Dodd-Frank is the comprehensive financial reform and consumer protection law written in response to the 2008 economic crisis. Toomey and many Republicans have argued the oversights are excessive.
One of the provisions in the House package mirrors a bill Toomey sponsored with New York Democrat Chuck Schumer that would make it easier for small companies to go public by giving them a break from Securities and Exchange Commission regulations.
Kevin Harter, the interim CEO at Bethlehem-based Saladax Biomedical, which develops tests to improve the efficiency of major treatments like chemotherapy by finding the optimal dose for eachcancer patient, said going public would allow him to expand and develop more tests.
But going public is a lengthy and expensive process, he said. To go public would take about three years under current regulations, and there’s no guarantee the market would be favorable at that time. Also, he said, he’d rather use his time and money on breast cancer testing and clinical trials than paperwork.
Another provision allows private companies to have more shareholders without having to go through detailed reporting requirements to the government. Under current law, companies that have more than 500 shareholders are treated like a public company for reporting purposes. The bill would increase the threshold to 2,000 shareholders.
Mike Eckhardt, general counsel for Wawa, a chain of convenience stores that started in Pennsylvania, said being a private company makes it agile and helps it succeed. But Wawa has about 300 shareholders to date, he said, and is worried about having to restructure if it hits the 500 ceiling.
More than a quarter of the company is owned by employees through a stock ownership plan. The bill would exempt shares received as part of an employee compensation plan from counting toward the shareholder limit.
Wawa spent about $10,000 on lobbying Congress on this issue, according to disclosure forms.
Despite its bipartisan support, the measure had its share of critics, including consumer protection groups and labor’s AFL-CIO. Critics say weakening regulations and transparency open investors up to fraud and leaves them vulnerable.
Barbara Roper, director of investor protection at the Consumer Federation of America, said she was dismayed that the White House had endorsed the bill.
“It was a surprise that the administration would buy into this message,” Roper said. “We’ve just come through a decade that had real damage to consumers and investors and workers and the economy as a result of weak financial regulations.”
Democrats who supported the measure criticized it as being a weak excuse for a jobs bill.
“This is not the jobs bill America needs,” said House Minority Whip Steny Hoyer of Maryland. “Not tweaking around the edges, not pretending that we have put something together that’s going to create a significant number of jobs.”
Toomey admitted it was almost impossible to quantify how many jobs these regulatory changes would produce, but said, “there’s no question in my mind that it creates jobs.”