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While I plan on calling my Congresspeople in opposition to this measure, I think it's important to understand WHY it's a part of the banking reform bill. Start

While I plan on calling my Congresspeople in opposition to this measure, I think it's important to understand WHY it's a part of the banking reform bill. Start-ups aren't the only companies that operate under this exemption. So do hedge funds and folks like Bernie Madoff. A company that only sells shares to accredited investors doesn't have to provide information on its operations to its shareholders or the public, and so has much more opportunity to hide shady business practices. If the limit comes down far enough in real dollars, you open up the opportunity for a "shadow stock market" that essentially skirts the regulations that we voted into place. That said, my inner libertarian ranks the potential damage to legitimate start-ups much more highly than saving millionaires from ill-advised investments.

dantheman 17y ago
If you choose to bear the additional risk hat should be your choice.
- sethg 17y ago
  Two words: counterparty risk. If you borrow from A (or if A invests in you) and lend to B (or invest in B, or, if B is a bank, deposit money in B), then any risk that B might default translates into a risk that A will have trouble getting its money back too. One could, of course, say that every lender is responsible for not only checking out its debtors but also its debtors’ debtors and debtors’ debtors’ debtors and so on, and if a lender finds itself on the end of a chain of defaults, them’s the breaks. However, the experience of the late nineteenth century—never mind the Great Depression or the recent unpleasantness—teaches us that when this idea is implemented as law (perhaps I should say, as absence-of-law), we have periodic crises where the whole engine of credit seizes up, the economy goes into the toilet, and impoverished workers take to the streets. Securities regulations weren’t passed to save you from the capitalist system. They were passed to save the capitalist system from you.

dantheman 17y ago

If you choose to bear the additional risk hat should be your choice.

sethg 17y ago
Two words: counterparty risk. If you borrow from A (or if A invests in you) and lend to B (or invest in B, or, if B is a bank, deposit money in B), then any risk that B might default translates into a risk that A will have trouble getting its money back too. One could, of course, say that every lender is responsible for not only checking out its debtors but also its debtors’ debtors and debtors’ debtors’ debtors and so on, and if a lender finds itself on the end of a chain of defaults, them’s the breaks. However, the experience of the late nineteenth century—never mind the Great Depression or the recent unpleasantness—teaches us that when this idea is implemented as law (perhaps I should say, as absence-of-law), we have periodic crises where the whole engine of credit seizes up, the economy goes into the toilet, and impoverished workers take to the streets. Securities regulations weren’t passed to save you from the capitalist system. They were passed to save the capitalist system from you.