Commentary Magazine


Cutting Angels’ Wings

Congress has passed or contemplated so many blunders of late that I, for one, am finding it harder and harder to muster fresh outrage toward every new one. But this latest being cooked up by Chris Dodd deserves a special shout out:

First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

All the prerogatives over private businesses; all the power over health care, now near absolute; all the dabbling in the inner workings of financial institutions; in short, all the regulation in the world, cannot seem to satisfy this government. Are the Democrat legislators ever going to have enough? Or is their regulatory fetish feverishly looking for new, exotic objects?

While Obama sheds crocodile tears over how hard startups have it, his henchman is working night and day to ensure that they never receive seed funding. Whichever way this bill is looked at, not a single rationalization for saddling angels with such burdens can be found. Unless, of course, Democratic legislators so believe in their own rhetoric of strife against them big, eeeevil corporations that they want to kill them in their womb or prevent them form ever being born, let along growing big. And if such is the motive, conscious or unconscious, no measures could backfire more sorely than the ones being dealt out. For any regulation that raises new barriers to entry eventually hinders competition, confers undue advantages to incumbents, and fosters just the kind of environment where oligopolies can flourish. If there ever were such a sinister monolithic entity as “Big Business,” it could not be more satisfied with this bill. But it is surely an occasion for entrepreneurs to weep, as I can attest from being married to one, all of whose startups owe their inception to angel investment and might have never come into existence under such debilitating regulation. Economic recovery in America is being dealt a crippling blow.