Unanimous Consent Agreement

Floor Speech

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Mr. MERKLEY. Mr. President, reserving the right to object, I am going to explain my concerns. Let me start by quoting George W. Bush. George W. Bush said, ``Free markets are not a jungle in which only the unscrupulous survive, or a financial free-for-all guided only by greed.''

He continued:

Tricking an investor into taking a risk is theft by another name.

We are in the process of considering taking a health bill related to the production of capital for small and emerging businesses and considering it on the floor of the Senate without due process by the Senate Banking Committee. We need that process because the House bill is full of problems for investors. It will create a marketplace where investors can be deeply damaged.

It is our responsibility in this body to make sure that as we produce a streamlined system for small companies and startup companies to access capital that we don't create, basically, a scheme for pump-and-dump operators seeking to defraud American citizens. That is why we need due consideration in committee.

I can't speak to the challenges with all the portions of the House bill, but I can speak to a specific section of the House bill called crowdfunding because I have been working with others, including the occupant of the chair, Senator Bennet from Colorado, and Scott Brown from Massachusetts, to say let's utilize this crowdfunding tool but in an effective manner. Crowdfunding is saying let's take the power of the Internet, just as we have person-to-person lending facilitated by the Internet, let's take that and enable people who see small startup companies seeking capital investments and give them a chance to present their ideas and for folks to invest in those companies. So they might receive thousands of small investments enabling them to take their dream forward for the benefit of the investor and the company.

But what is wrong with the way the House drafted this bill? I will give short examples. It enables companies to raise up to $1 million by providing no financial information--no financial information. That is not an investment market; that is a scam.

Second, companies do not have to go through a registered intermediary. In other words, you or I, tomorrow, could start up a Web site and say: Companies, sign up; investors, sign up--with no sort of protocol for the registering of information and no system required for the protection of investors. That is a major mistake in this legislation.

Third, under the House bill, a person could say: Here are 10 stocks, 10 potential companies to put your money into. Through that action they could take 100 percent of your annual income in one fell swoop. So as we create this new, this particularly interesting marketplace, full of potential, we don't want it to be a place where no financial information occurs, no rules for the intermediaries, and people can be taken for their whole annual income in one fell glance. That is no way to build this wonderful potential marketplace.

To continue, the House bill lacks any advance public notice. So a company can provide notice to the SEC on the same day they offer the stock, and upon getting 60 percent of the amount they are seeking, the target amount, they can walk away with the investors' cash just like that. In other words, offer it, no chance for the SEC to look at it, collect their $1 million, walk away, and they didn't provide one ounce of financial information.

If you haven't seen the movie ``The Boiler Room,'' I encourage you to do so because you will see how scams actually not permitted by law were used to defraud honest American families. In this case, we are just paving the path to predatory investing schemes. So that is a problem.

The House bill allows anonymous stock promoters so that it encourages the opportunity for pump and dump. This is a reference to promoters saying how wonderful something is and not identifying themselves to having a connection to the company offering the stock. It doesn't address the issue of delusion.

If you had a chance to get in on the start of Starbucks, when they said they wanted to start up a coffee company, wouldn't that have been great to be in on the ground floor? You say: You bet--and you got 1 percent of Starbucks stock as a result. You would be very rich today.

But what about a company that proceeds to use a strategy of deluding the original investors so that your initial investment is worth nothing when the company actually gets traction as a successful entity? That certainly is an issue. These issues have all been wrestled with and addressed by the bill Senator Bennet, Senator Brown, and I have put together.

The other sections of the House bill have similar problems. I will not speak to those problems because there are other folks who are much more knowledgeable about it. I will stick to my section and use it as an analogy of why this entire bill should go through the Banking Committee.

Let me read to you a letter from Motaavi. Their slogan is ``Investment for Everyone.'' Isn't that the perfect slogan for crowdfunding, ``Investment for Everyone''?

They address their letter:

Dear Senators Reid and McConnell:

We are a crowdfunding intermediary based in Durham, NC. We understand the Senate will take up the [House bill] shortly. We are very concerned about language in title III. While we appreciate the broad exemption written by the House, the language does not protect investors and puts the crowd funding industry at risk of significant fraud. However, more responsible language does exist.

Then it refers to the bill the Senate has been working on. Then they proceed to list many of the flaws I have just listed.

So here are folks out in the private sector who want to see a successful process, and they want to be an intermediary. They don't want to see this potential industry brought to a halt with a terrible reputation because it becomes a predatory industry.

I have another letter from Launcht:

This latest bill, the CrowdFund Act [the Senate version] is important because unlike previous bills, for the first time we have a Senate bill with bipartisan sponsorship, a balance of oversight and Federal uniformity, industry standards, investor protection, workable funding caps.

It lays out what this work should be in this bill.

Finally, I want to note the perspective in the New York Times editorial, entitled, ``They Have Very Short Memories''. It is scathing in its critique of this process we are engaged in:

House Republicans, Senate Democrats, and President Obama have found they support: a terrible package of bills that would undo essential investor protections, reduce market transparency and distort the efficient allocation of capital.

They go on:

Of course, the supporters don't describe it that way. They say the JOBS Act--for Jumpstart our Business Startups--would remove burdensome regulations that they claim have made it too difficult for companies to raise money from investors.

Never mind that reams of Congressional testimony, market analysis, and academic research have shown that regulation has not been an impediment to raising capital. In fact, too little regulation has been the root of all recent bubbles and bursts--the dot-com crash, Enron, the mortgage meltdown. Those free-for-alls created jobs and then imploded, causing mass joblessness.

Wouldn't it have been great if, when those deregulatory efforts that didn't deregulate in a positive way, cutting out unnecessary redtape but in negative ways, which created a Wild West marketplace with all kinds of predatory practices, would it not be nice if the Senate stood in and said we are the cooling saucer--I have heard that term ever since I came here, that we are the ``cooling saucer.''

We cooled our heels for 3 weeks with the Transportation bill on the floor, and we weren't able to consider one single amendment during that 3-week period. That is a deep freeze, not a cooling saucer. Now we have gone from deep freeze to bullet train. We need to slow this train down. We need to have due deliberations to recreate the sort of deregulation that is so important for the future growth of the United States and the future success of American families.

I am going to withdraw my objection, Mr. President, because I wanted to make a point now that, hopefully, will help guide our deliberations over the next couple of days. It is not that we should not be getting to this topic; we certainly should. But we need to do so in a manner that works for American businesses, small businesses, startups, and families, and the House bill doesn't do it.

I withdraw my objection.

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