Venture Capital Creating Systemic Risk???
Rhode Island Senator Jack Reed was quoted in the WSJ yesterday saying that VC firms managing $30mm of capital or more need to report to the SEC because "the government needs the reporting requirement so it can assess whether
these private pools pose a systemic risk to the financial system."
The only systemic risk the VC business is creating for the financial system is attempting to put the current one out of business by financing entrepreneurs with new ideas for banking, brokerage, insurance, and other financial services. I'm not joking about this. I believe entrepreneurs will use technology to reinvent the way financial services are provided to consumers this decade.
But to suggest that small venture funds of $30mm could possibly be creating systemic risk to the global financial system is ludicrous. I can't even imagine a huge $1bn venture fund could create systemic risk, but I can understand how a regulator might want to keep track of something like that. But a $30mm fund???? I'm speechless.
So a venture fund with less money then a lot of wealthy people poses systemic risk to the economy? Can I have some of what he’s smoking?
I have no words for that, it’s just pure stupidity. The companies that wrecked the economy by being “too big to fail” don’t need new rules, but VC firms that fuel innovation on small investments, THEY pose a systemic risk? I hope that’s a joke, but nobody’s laughing.This comes back to a major problem that we have to deal with….how do we solve the problem of politicians that don’t understand the industries they’re supposed to regulate?
Elect those that do. The citizenry of this country need to become much more involved in governing this country. The tech exists now to make the governing of this country much more transparent and by extension it allows us to hold those who we charge with voting on our behalf much more accountable. Washington is a corrupt system but we’ve allowed the corruption. As Fred pointed out in a prior comment about how the system works, they’ll take his calls because he donates.However, what we need to ensure is that they take our calls because we can donate too, but with attention rather than money. I find it disgusting that we can mobilize tens of thousands of people to save a TV show (Jericho on CBS, Chuck on NBC) but can’t get enough people together to ensure that our government is “of the people, by the people, for the people”. They no longer govern on our behalf, that needs to change and we as the citizens of this country are the only people who can change it. Until we do, we’ve got no one but ourselves to blame.
This just shows, once again, how CLUELESS and our government is. It’s scary that all these clowns have managed to get elected into office. Leveraging hundreds of billions of dollars is a risk. Handing billions of taxpayer dollars to dying companies and industries is a risk. A small Venture fund created to innovate and create jobs and growth in the economy is certainly not a systemic risk to the “global financial system” When is our government going to start seeing what the real problems are? The US government is the biggest risk to the global financial system.
So much for the best and the brightest. I have never seen such an uninformed and asinine statement. Then again, I need to consider the source. Simply amazing.
we’re getting somewhere. the problems are starting to be acknowledged. this is a good sign. now, let’s just speed up the progress on this trajectory, and get straight to the heart of the matter: monetary policy, and 9/11 being an inside job.massive financial overhaul is needed. the nation-state system has been hijacked and is being used to create a one world government with a centrally planned economy, more tyrannical than anything you can imagine. it will put apple to shame.the folks in congress aren’t going to fix anything until people start voting kook. even then, the votes are rigged, so that issue has to be addressed.of course, economic independence begins with sound money. hence, the heroic role of gold, defender economic liberty.if awareness of all of this is too much to ask, then we get what we deserve, don’t we.
if awareness of all of this is too much to ask, then we get what we deserve, don’t we. – Indeed.
You’ve got a point on gold. Not that I believe it has more instrinsic value than human labor (the ultimate standard KidMercury man hours but massively diverse). But the World of Warcraft and gold farming economies were fairly stable with large inflationary pushes depending on trade skills and daily quests. The time sink of gathering skills, fast mounts (travel) etc met local equilibriums but unfortunately they never connected the markets (auction houses) between servers.What’s your take on whuffie’s or HubCulture’s, or SecondLife’s virtual currencies? Could these “far out” measures bring stability to real world transactions outside of the control of governments?Can the currency of social debt and favors disrupt cash?
they could probably all do it but most lack the intent/awareness, andas such i think they will likely get blindsided by problems (i.e.legislation that will protect the banking industry from such adisruptive threat…..particularly likely since the bankers own thelegislators)
On the Blackberry – Exchange is still the king of the hill, being the best at it is a good strategy but I don’t think you have to exclude focus on everything else. Bringing a webkit browser to the platform later this year is a good start, but it’s years late.
…and yet some people STILL want the government to run their own VC firms…Do seed stage tax credits.Let them be LP’s even.But there is a DNA mismatch between entrepreneurship and the government.
“there is a DNA mismatch between entrepreneurship and the government.”Absolutely.
I was discussing the mismatch between large institutions (education/government) and creative/entrepreneurial people recently. If you like action and have a vision for things, institutions that don’t budge are repulsive.Do you all think this leads to a lack of entrepreneurs involved (directly or indirectly) in government? Or do we only exert our influence in the private sector?
Entrepreneurs want things to be better and they want to get things done to make it so.Large institutions innately have too much bureaucracy for entrepreneurs.
I think these things are true of people in general, but it seems for entrepreneurs, it’s on a whole new level.
Some might say there’s a DNA mismatch between many VCs and founders.We need to find the folks in gov that get what startups mean for the future, and support their efforts. Too bad we can’t support ideals independent of representatives. Same issue with following and subscribing to social streams. It’s all or nothing with attention and political support.
“Some might say there’s a DNA mismatch between many VCs and founders. “So very true. The stories I could tell…
Why do they find excuses. They know the root cause. It seems that they prefer to find a whole other excuse for the mess.
And these guys are going to revamp the financial system? It’s terrifying.
i cant even comment because this cant be true.
You did comment and it appears true according to the wsj :()hey, we can raise groups of 29.9 million funds that work together. Could be a good opportunity (j/k I know jack about investing besides what I think is coming and when).
Actually, that might be a realistic scenario if this passes. It will complicate VC math beyond belief, because there will be a ton of syndication, (this can be good, and I would also bet there would be a ton of arguments over stuff like board seats) That actually could cause problems- companies and funds would be more interlinked than ever- imagine if for a pitch you had to go to 2x the amount of funds to get funding because they all had to agree. And if someone dropped out later, then you have problems.Also, big scaling issues and technology out side of this realm (say biotech) is not going to be happy. They can require massive initial investments. It’s going to kill some areas badly.
This is the natural result of a larger government. These are the same clowns who want to run healthcare. First they taxed and regulated industrial production out of the country. Now the financial services industry is in their sights. They can not help themselves.This example is a good illustration of how government goes too far. To a much larger political discussion, a limited government never will do dumb things like this, but you have to be willing to accept the harsh hand of the market and real suffering caused by “lack of regulation.” If you believe government should have a much larger role in in protecting the people, then you have to be willing to accept the harsh hand of government and the real suffering by “over regulation and taxation.”
This is caused by ‘who watches the watchers’, big or small government has little to do with it. The fact is simple, the people are the ultimate check and balance and we’re failing at our duty. No one likes to point the finger at the people because it means they have to take responsibility and that’s a forbidden word in today’s America. Until we stop taking Democracy for granted, stop treating as a static and remember that it was an ideal to which we’re always aspiring this will continue to happen. Less or more government is inconsequential, more personal responsibility for this country is the true key. (I could go on…)
I think responsibility and size/complexity of the government are related Malcolm (btw really enjoying your regular commenting).It’s hard to understand and keep track of Big gov because the chains of responsibility are so intermixed that. O’Reilly recently posted about a results oriented test set of governement positions. That caught me off guard. I’ll see if I can track down the link (fingers getting cold with the wind).
The concept of “Government as a Platform” is the only thing that can save us. O’Reilly and the rest of us should continue to champion it. We already know Governments fail. Trying harder doesn’t get the results we need.
To me gov as a platform implies competition. That would imply self rewriting government or metagovernment. In order to have the rapid change such a system would enable, societies need to break up the responsibility into stable and shifting components.I need to think more about this, probably an unintended consequence of your comment Kevin.
I always hope I cause people to think more!But you’re absolutely right. Government’s problem is that it isn’t good at removing itself, since it is a monopoly. Since people are constant clamoring for action from government, and politicians are career politicians that have to protect their jobs, the government feels it must always do something. Government is hard to measure, policies have huge implications, and the results are difficult/poorly measured. As you said, breaking it down to more stable components is key.Most importantly, the key aspect of gov. as a platform is that it is “self-organizing.” I don’t think this is primarily important because self-organization is scalable. Self-organization is key because it is a product of “personal need.” The product is closer to the customer (citizens.)Once we’re out of a realm, we quickly become detached from it. Things change quickly. And career politicians are ill-equipped to make decisions “from afar” that have wide reaching implications in ways they don’t understand. Plus, most don’t have any direct experience in the domains they create policies in.Reminds me of a professor of mine: “There’s a big difference between people that teach Thermodynamics and people that do their research in Thermodynamics.”
Ha, I was Physics undergrad :), 1991-1995 feels so long ago
What would happen if our communities tended towards self-sufficiency? Would individual responsibility to their community increase? Would our reliance on a federal, state or local governmental structure diminish? I believe to the extent we take our own responsibility, we will rely less on the government and the government will have less power. In effect a distributed framework of self-reliant communities creates competition for government. This is not something that needs to be mandated by government but something we each may strive to do so that regulation of our activities is moot; we already demonstrate we are responsible and connected to the rest of the community thus we are self-regulated. Just ideas.
Yes. If responsibility can be shifted to the individuals that need the services the most, and these individuals can have an impact, things will tend to more self-sufficiency and better service. Essentially, break down government to pieces that can be handled by the entrepreneurial action and energy that many people possess, even if only at low levels.
How do we start breaking the government into pieces? I agree this is the proper direction.
You can see glimmers of the mechanism. Take a look into the ‘Gov 2.0’ movement being championed by O’Reilly. Open Data is also enabling this. Also check out CitySourced, it’s an example of a group of startups cropping up that allow citizens to exert more impact. Big problems are an aggregation of many small problems.
Thanks Mark, time has been on my side lately. She is a cruel master but sometimes shows one mercy.My problem with the small government camp and any ‘revolutionary’ camp really is that people assume that a new system will fix the old. In reality, it’s the people who’ve taken responsibility for fixing the old system that have fixed it. And unfortunately, as the passion of those people fade and the next generations are born, that same air of entitlement and complacency begins to form yet again. And as it does the system inevitably becomes more corrupt, power becomes more concentrated and government becomes more expansive because the watchers have vacated their posts and the people have vacated their responsibility to themselves. Small or Big government matters not, government is an organism and it will attempt to expand on its own accord. what matters is that the people stay vigilant and watchful over their Democracy that it doesn’t become of the people, by the people, for corruption or for its own sake. The people have abdicated their responsibility to themselves in favor of government overlords, is it any surprise then that the government overlords try to lord over us?
Not sure if this got posted before 3G kicked out:Here’s my take on size (size is # of people, total cost, and total legal/paperwork)1) as you mentioned time, how much time would it cost you to keep your attention on one government agency, versus 100,000. While distributed moderation can work, our system isn’t designed that way. Sure states and local gov can handle many things, but the majority of my tax dollars go to Feds, which results in a cumbersome, unelected gov workforce. If you dedicate 24/7 to tracking public expenditures and projects more power to ya, there’s still massive spending that is untracked. “what is measured can be improved”. Size matters in systems that aren’t designed to flow like data through the Net. Many are working to make data flow from and to gov more transparent and therefore easier to moderate with a distributed body.2) Motivation: I’ve never seen a gov employee work like a business owner. We need go reinvent ownership of results at a national level3) there’s no consideration of size cost (managing 5 people vs 200 people – there’s a big cost difference). This results in poor decisions.4) there’s no long term financial planning. Everything is term based. The opposite is people with too much power. We need a way to motivate leaders to think longer term than their current term
I think all of these can be solved by accountability. I don’t have to watch every government agency, I just need to watch the guy who we put in charge of them.Sun Tzu said that “if orders are unclear, it is the commander’s fault. But when the orders are clear, and are not carried out, it is the officers fault.” In this situation the people would be the General and our representatives are the officers. If our orders are clear to them when we send them to D.C. and they are not carried out, it isn’t the fault of those who the government agencies employ(the soldiers), but the fault of our officers(our representatives) and they must be held accountable.However, currently, I don’t think our orders are clear to them which is why they run amok. It’s our fault when that occurs (the commander). In a nation the size of ours it will never be possible to watch everyone ourselves, but it is more than possible to hold our officers accountable for not carrying out our orders and it should be possible to hold ourselves accountable for not issuing clear orders to start.Long-term planning & motivation are in staggering abundance in the private sector and that’s mostly because the orders are clear from the top (profit) and they are carried out by the officers (managers). The soldiers follow the managers because of accountability up and down the chain. Our nation lacks this accountability, the ability to issue clear orders and we suffer for it. The problem was fixed once by people, the Constitution is proof of that, it can fixed again in much the same way.
This is why it’s so hard for businesspeople to have confidence in the government. This line of discussion is absurd and doesn’t even have a “pro and con” of an argument. The only thing to say is that someone needs to explain the business world to Senator Reed. I think he needs to talk to Julius Genachowski. Julius is the only senior admin person that knows this is silly.
it’s class warfare plain and simple – ‘systemic risk’ is just an excuse
yes, totally true
second this, on the other hand, it says a lot that there is radical disparity in the US about who owns a stock or bond and how wealth looks now.
Agree. They want to regulate because there are a lot people getting rich around. But that doesn’t make it less dangerous. I’m European, and if you are not careful you are gonna end with the same excess of regulation that we have. And you are not gonna like it.
I already don’t like it
Good God. Somebody please stop this man. How can we contact his office, explain to him what venture capital actually is, and start causing a ruckus? I’m going to take a look and will post.Like said in my post yesterday:”People live in their own world. And that’s understandable to some degree. Just don’t be afraid to cause a ruckus and make your world a part of theirs, whether they like it or not.”http://bit.ly/9KcD3l
This is another indication of how little our representatives and their aides/ advisors know. The gov’t doesn’t NEED more to regulate … they can’t regulate anything now … mines, banks, SEC, FDA, INS … all nincompoops. We need free flow of angel and venture capital.
This guy is a blooming idiot. These are the kinds of people that are running this nation. They’re put into their seats by the voters. So if he’s this big of an idiot, what kind of people voted for him?
I’m just shocked that anyone would be shocked by this.These people want to destroy the private sector. They see entrepreneurship and investment as gateways to the sin of unequal results. It’s been a long time since such a radical bunch of statists actually had control over the US government….but here we are…..we hoped for change and we’re gonna get it….hard.
IMHO it has not been a long time since a radical bunch of statists had such control. bush tripled the size of government, soetoro is simply following in his footsteps.
It is a slow boil
Indeed….soetoro is def turning up temp though
Bush drove conservatives nuts when he started spending like he did. Still bothers me. But the velocity of government into our lives and our pocketbooks is staggering over the last year.And the true irony is that Obama’s administration is going after the groups that supported him.
i’m not sure we can say soetoro is a bigger thief than bush jr just yet. bush jr sent oil prices to over $4.50 while saying the economy was strong the entire time. when all is said and done i think soetoro will prove to be the greater crook, but he has his work cut out for him.
This got squashed once last year for obvious reasonI’m shocked this guy is raising it again
“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” — H.L. Mencken
Don’t throw the baby with the bathwater. Obama 08 has been a force for good for the better part. On this particular debate we are just going to have to join the process and provide the counter weight.
Perhaps there are times when the baby and the bathwater should both be discarded. This is one ugly baby. Maybe a very late term abortion is warranted?
Well. I was one of Obama’s earliest supporters in NYC. My love for the guy is unconditional. But even on merits, he is destined for greatness. http://democracyforum.blogs…
If you want to have a real impact and make positive change in your world, you don’t run for office, you found a startup.
Or enter the ministry.
To quote Doc Holiday: “my hypocrisy only goes so far”
An absolute truth about government agencies is that that their lust to regulate knows no limits, and when the power to regulate is attained the effort to reverse such authority is exponentially greater than what was required to attain it.This is where Congress should be stepping in, these agencies all report to Congress by the fact that their officials are subject to Congressional inquiry and more importantly their budgets are directly controlled by Congress, but the other truth that we have observed with this Congress is that it too has a lust for regulatory power and has little self-restraint.The financial markets are subject to the same human forces that every other market is subject to and as such require moderation by regulatory, whether industry or government sponsored, entities. Few would argue that the existing regulatory regime is adequate but at the same time few insiders would agree that piling on more regulations would result in a more effective regulatory effort.It’s high time we rethink how financial markets are regulated but it is utterly apparent that Congress is the wrong place to look for the new ideas because they, the members of Congress, apparently don’t understand how the financial markets work or have a decades old understanding that does not reflect current state of the art. This isn’t surprising, they spend their time outside of the real world and when they do hold hearings the real purpose isn’t the search for knowledge but rather to hear themselves talk.
yup. it all starts with virtual currencies, once you own monetary policy you own the economy, that is the real way to non-violent reform/revolution.
I think this statement proves one thing and one thing only; Rhode Island Senator Jack Reed is not serious about financial reform. Which is unfortunate for a member of the Senate Banking committee.As a CPA, I’d be more interested to know his thoughts on the systemic risk posed by off-balance sheet accounting, Congress’ ability to suspend Fair Value accounting whenever it’s convenient, and unregulated derivatives than his thoughts on whether or not the investors in twitter might bring down our economy.
A small variation on the theme: not VCs, but the LP community, is creating systemic risk. By inflating an asset class that is meant to be a cottage industry to a size that is unhealthy for all involved. See Fred’s VC math problem circa this time last year.
true, but that is a by product of overall inflationary monetary policy.
Yes, that, plus: a widespread inability to think an original thought. There should probably be some semblance of that for a free market to function properly.
Ok, lets pick this apart: It may not be the asset class per say, but too much money and growth that has to chase yields to grow some more that is creating systemic risk. This asset class has the potential for high growth, but so do others.Some larger questions remains: does changing disclosure rules and changing those who can invest change the math? What might happen is a hell lot more small firms running lean. Too small and you may be running too lean, especially if you will invest in a B, C, and other rounds. (Those get large) Even with syndication, it doesn’t look like you could cover everything. On the other hand, what might happen is the development (and in fact, potential overdevelopment) of really small seed stage and round a stage funds which are more able to work in syndicates. Funds that do larger work will be shut out. Too lean.As for closing out smaller investors- the market will shift, you’ll see more semi-legal activity (family and friends), and/or a growth of institutional investors shifting to more high risk funds (like seed and round a- much higher risk profile than b, c, etc). That could create very bubbly conditions.Other things that could happen: Closure of things like SecondMarket- which relies on less disclosure. People want to hedge their positions and keep things quiet. In order for SecondMarket to function well right now, it needs to allow for more secrecy as the companies there are not public. That’s a bigger deal. SecondMarket and its cousins allow for secret growth room and for better valuations. For whatever we think of the last crash, taking mortgages and other debt off the book by selling it did allow room for all sort of debt to grow, including good debt (such as the debt to start companies). We did take it to an extreme.And while SM can be regulated more (see the ICE) too much and you kill that growth. Companies now, in order to really do well at an IPO, probably shouldn’t be a penny stock. I mean you can do that, and many do, but some should avoid that fate.Unless of course, the SEC believes in bringing companies to the public before they generate regular amounts of cash.
If $30 million venture funds are not required to register with the SEC, islands all over the world will capsize.
This idiocy is just politics. Primarily its the politics of pacifying an angry electorate in RI. If you are all upset about this, I’d suggest doing something. You’ve got to counter politics with political action. Taking the protests to the senators doorstep is one option. I just posted a complaint here http://reed.senate.gov/cont… and you should too. It’s particularly important if you live in RI.I bet there are other better ideas the smart people on this list can come up with that are even more impactful. I’d love to hear those ideas. If you all are as pissed off as the discussion indicates, let’s do something!
This isn’t about risk. This is about control. The VC world is currently beyond their control and they want it in their control. They (the state) doesn’t like anything which they don’t control.
FredYou asked for these folks to come in. Government always wants to expand. It is it’s nature.Now it is coming into your world. You have my empathy but I can not give you any sympathy.TomPS The classic definition of a conservative is a liberal who has been mugged.
I didn’t vote for this guyAnd I am quite certain Obama would not support this provision
We can only judge any leader by what he DOES rather than what he says. This is a fair observation on all sides.Bush was a superb Governor of Texas and although “to the political manor born”, it was a financially conservative manor when his Old Man was in charge.Then the guy goes to Washington and becomes a profligate spender. Only results count.Obama demonizes the AIG and Wall Street fat cats and then when the first sugar titties are distributed puts them right back in business as if nothing happened.Wall Street distributed huge 2009 bonuses. Only results count.You need to take a careful read of what Dodd and Frank are working on as it relates to financial reforms. They are being very, very secretive — surprise given healthcare’s transparency — but you can get some info through SEC related private companies as Dodd/Frank must consult w/ the SEC and PCAOB to get it figured out. This VC nonsense will look like small potatoes when the full plan is lined out.How much financial regulatory experience do you think Obama got as a community organizer? Me — not so much.If you can figure who wrote the healthcare bill, then you have a chance to discover who is writing this nonsense. It is not the Congress. It is not Obama.
“We can only judge any leader by what he DOES rather than what he says.”Not walking the talk makes it hard for one to be respected and followed. It makes him a bad leader.
I asked this question on Andy Swan’s blog recently, but why are Dodd and Frank — two men who failed so miserably in their oversight role in the lead up to the financial crisis — still banking committee chairmen?
because 9/11 was an inside job and no one wants to solve that problem.
No one has solved the Kennedy issue either…or wait…maybe they did solve the Kennedy issue which is why there is an issue of who solved the Kennedy issue…or there should be an issue anyway. I forgot though, it was a MAGIC bullet. That explains it.
numerous CIA agents have stated the CIA had a key role inassassinating JFK. former CIA agent e. howard hunt confessed on recordto being a part of the team assigned to kill kennedy (this also fits aton of available evidence). but, there were likely other factionsinvolved. the CIA played a major, major part though. the assassinationof JFK is when the military industrial complex took over the unitedstates government. after that, vietnam accelerated, the US dollar cameoff the gold standard, the bush family spent 20 years in the whitehouse, and the political, cultural, and economic impact of becoming anempire have been felt loud and clear.
Raw political power.
Raw Political Power will bite them later- I happen to agree with this idea of Local and National/Multinational powerbase, with states being able to do very little- Local will eat him alive if/when communities do not see themselves growing after this period
Because of the fragility of the Democratic Congressional margins.
bush jr corruption while texas governor: http://www.realchange.org/b…the bush family funded the nazis and operate from the same mindset. after funding the nazis, the whole “right wing/neoconservative” faction brought them into the USA via project paperclip, killed kennedy via the CIA (which bush sr was a part of at the time). reagan did not want bush sr as his VP, but then was coerced into it. when he announced bush sr as his VP, many top members of his campaign walked off, because they knew that reagan had sold out at that point. reagan truly become a bush puppet after the assassination attempt, which has many links to being coordinated by the bush family. then bush sr, former CIA director, serves eight years as vice (controlling things from behind the scenes in much the same way cheney called shots while bush jr was the buffoon put in front of the public) and then becomes president.the book the unauthorized biography of george bush by webster tarpley can verify all of this, providing tons of references. you can also search the web and find it, most information is freely available these days, no point putting the effort into concealing it as the people will ignore it anyway.bush jr is of course brain dead, simply a puppet of the neoconservative forces that put him and bush sr in power. they are high up in the food chain, they own the dumbocrats too, and thus why government is always expanding against the people. notice that bush and clinton are pals now and enjoy doing fundraisers together and stuff. all for the good of the children of course.
There is almost always a bit of truth in just about any conspiracy theory. I always remember that we funded Osama Bin Laden/mujahadeen v the Russians in Afghanistan and that in the Iraq-Iran War Saddam Hussein was our boy and we used that war to study on the ground the effectiveness of chemical weapons — which I am absolutely sure we supplied.So I am game for almost any conspiracy theory.Bush is way, way smarter than what you give him credit for and he has enjoyed the advice of 2 generations of experienced advisors — the smartest being Jim Baker who simply went to Florida and stole the election — fair and square mind you — for our boy George W.For the children…
Ok sounds great, so next time you wish to praise the bush family, please remember their nazi origins, and the imperial impact they have had on this country and the world, and what this has done to the US economy and effectiveness of the US constitution, in addition to those who have been killed due to bush family agenda (millions, and we can include holocaust victims in that count, since the nazi regime was funded by the bush family).Or, if you think the bush family deserves praise in spite of these truths, feel free to say so.Also, if you wish to use the term conspiracy theory, please feel free to include your definition, as typically the term is used to dismiss information presented as lacking credibility.
Not to put too fine a point on it, but Grandfather Bush — Prescott — was an investment banker (a bit before that term was so exactly defined) who acted as an outside financier for certain German companies who ended up supplying war materiel to the Germans in WWII.He also served as a nominee director for certain US subsidiaries which were necessary for them to conduct financial transactions in the US.His actions were initiated well before the term NAZI was in common use and well before Hitler came to power.When confronted with the reality of his position, as the world spun toward war, Prescott resigned his positions arguably having previously made money as a financier and as a nominee director. To argue that he supported the Nazis during the war is a stretch of the timeline.The Bush family has supplied two Senators, one VP, two President, two Governors and a SC Justice to the Nation. His family traces is roots to the Mayflower.I am very high on G HW Bush admiring his service as the youngest Navy pilot in WW II and I think W was a very, very good Governor of Texas. Because I admire someone through some limited lens does not mean I vouch for their entire life.I think a “theory” is simply the logical extension of some known or hopefully known facts which creates a plausible explanation for otherwise undivined circumstances. I do not view it as a pejorative term as frankly I have seen and personally experienced too many “kooky” things which have turned out to be true.Last, I greatly admire the creativity that goes into having a kooky theory and I have more than a few myself. Too many people view without “seeing”.
To argue that he supported the Nazis during the war is a stretch of the timeline.the assets of the company bush used to support the nazis (union banking corporation) were seized by the united states government under the trading with the enemy act in 1942, while WWII was still going on.http://www.guardian.co.uk/w…The debate over Prescott Bush’s behaviour has been bubbling under the surface for some time. There has been a steady internet chatter about the “Bush/Nazi” connection, much of it inaccurate and unfair. But the new documents, many of which were only declassified last year, show that even after America had entered the war and when there was already significant information about the Nazis’ plans and policies, he worked for and profited from companies closely involved with the very German businesses that financed Hitler’s rise to power. It has also been suggested that the money he made from these dealings helped to establish the Bush family fortune and set up its political dynasty.here is a link with much more on the history of the bush family and how they financed nazis: http://www.spartacus.school…2. I think W was a very, very good Governor of Texas.here is a partial account of his corruption record as governor of texas: http://www.realchange.org/b…i assume you are supportive of him in spite of his corruption, or do you dispute the information presented about his corruption as governor. feel free to clarify if you’d like.3. thank you for clarifying that you do not use the term “conspiracy theory” pejoratively or dismissively. for those reading the comments, please bear that in mind.
As I indicated, Prescott Bush acted as a nominee director for companies owned by the Thyssen family — big German industrialists and a client of Bush’s father in law’s investment bank.This is not uncommon when states and the Federal government require “domestic” corporations and directors. I myself have acted as a nominee director for scores of companies who must be domesticated in Texas even my own. It is just a paperwork exercise and not even remotely troubling.The Second World War started in Dec ’41 and by mid-1942 all the assets owned by Thyssen — including the entities which employed Prescott Bush as a nominee director — had been seized under the Trading With The Enemy Act. There has never been an allegation of wrongdoing by Prescott though he did make money for his services. He was helpful and instrumental in these seizures.This is pretty small potatoes.The criticism of W cited in your link discusses his virginity for goodness sake and the fact that UTIMCO — the manager of a huge pile of money — invested with folks that W knew. Well, consider that W knew everybody in Texas who had more than $2.If you knew anything about UTIMCO you would realize how silly it is that a sitting Governor could ever get that bunch of folks to do anything.Hell, UTIMCO is an investor in Fred Wilson’s venture empire.Calling W “corrupt” is barking up the wrong tree. If you want to say he failed to rise to the ocassion as it relates to the VN war, have at it. That he was Richard Rainwater’s bitch, have at it. Corrupt, not bloody likely.What did happen was that W got some very good legislation through the Lege and became fast friends with the Dem Lt Gov — the holder of real power in TX — and the guy endorsed him, contributed to him and supported him. Nothing short of a miracle.
You’re missing the big picture. The alliance between bush and the nazis goes back to the union banking corporation and funding of nazis and nazi allies prior to and during WWII. The bush family rolls with all the top nazis and the folks that helped bring the nazis to the USA via paperclip, like dulles. These folks hijacked the CIA and created much tension between the Agency and JFK, which of course concluded with the CIA’s assassination of JFK — the true point at which democracy had been subverted and a fascist coup had occurred.This viewpoint is most easily understood if we can accept that 9/11 was conducted largely by US forces and as such constitutes an act of treason. Such treason is of course consistent with the bush modus operandi, as evidenced by their violation of the trading with the enemy act, their involvement in building the CIA (unconstitutional, definitely a long history of treason in many of the higher levels of the Agency), their attempted assassination of reagan, and many other crimes.The bush family is at the forefont of american politics, and is one of the leading reasons america is on the decline. It is the premier symbol of america has fascist empire rather than america has a capitalist nation.Sent via BlackBerry from T-Mobile
While there is ample evidence that Bush’s IB client, Thyssen, was an early supporter of Hitler until he (Thyssen) fled Germany, was captured in occupied France and subsequently imprisoned in a concentration camp — there is no evidence that Bush had any direct dealings with the Nazi regime.Any service by Bush to his client Thyssen in the US was terminated by the seizure of Thyssen assets in mid-1942.The underlying allegation made toward the bank was that it was intended to fund fleeing Nazis in the event that Germany lost the war. That didn’t work out too well.Dulles is an equally intriguing character because of his broad international representation of German companies in his law practice.Even his leadership of the OSS in Switzerland carries with it a bit of intrigue as Switzerland was openly financing the Germans (sovereign gold of conquered nations notwithstanding), selling them arms and ammunition, allowing them access through Helvetia to Italy and hosting German R & R establishments.Dulles got the Swiss to puke up all kinds of banking records indicting the Swiss as Hitler’s Banker <<< title of good book on the subject.Again, the timeline simply does not appear to have enough elasticity to implicate Bush in aiding and abetting the enemy.
Why don’t you find out if he supports it? And find out who else does? You mentioned in a previous post (“The Happiness Project”) that you were friends with Robert Rubin, so you must have connections in the Democratic Party establishment. Find out who supports this nonsense. If one of your representatives (or someone else you’ve made campaign donations to) supports it, call them.
Face it — every unregulated pot of money of any size is going to come under the regulation of the SEC eventually.Why?Because the first question that always gets asked is to the SEC — hey, do ya’ll think PE/hedge funds/VC/real estate syndications should be “regulated”?Can you imagine an SEC guy saying “NO”?Neither can I.Just like the healthcare debate, the world is filled with “one off” truly horrific anecdotes that nobody is able to measure v the size of the industry.So what if one person suffered some horrible injustice? Should it impact the 10MM other such transactions which ended just fine?Regulation always PUNISHES the few while IMPEDING the many. Regulation never, ever IMPROVES the regulatory environment for the many. They don’t think that way.
The problem here is responsible behavior and a bit of public relations. Just with laws, regulations, as you indicate punish the few and impede the many. For example, most responsible drivers know their limitations and will not text while driving but the prospect of wholesale abuse scare the majority to accept a mandated limitation therefore replacing responsibility with regulation. And so goes the world of finance where greed seems to usurp responsibility. If we don’t want excessive regulation we have to show that individually and thus collectively we accept and demonstrate responsible behavior. And hence the public relations issue. Does the financial industry have a PR arm to minimize the Madoffs and shine light on the wind farms and community projects we help finance? If in finance everyone was not thinking about maximizing their own positions then we would not be subject to Frank’s and Dodd’s excesses.
Your point is well made and fair. The challenge has always been will regulation ever get the bad guys to do good? That is the only behavior that is targeted to change and I fear it is unreachable.The good guys are already following the law.Do you think that Bernie Madoff was even minimally impacted by the existing SEC regulations which stood for the proposition that you should not defraud your customers? His fraud was so pervasive, it would be impossible to catalog the entire list of regulations and statutes he violated. In addition, he was apparently a pathologically toxic personal able to destroy without any sense of guilt. What a beast.We do not need any NEW laws to deal w/ the BM’s of the world. We simply need to ENFORCE the ones we have.Unfortunately, today that is an all too common problem. It pertains to banking, mortgage lending, immigration, securities, hate crimes, gun control — and the list goes on.You do raise an interesting point about the industry banding together to form a coalition to push back. That is a valid strategy. The oil & gas industry has done just that and is running ads.I just don’t think people are tuned into anything these days and it is virtually impossible to contain the ocean of negative publicity which is driven by anecdotes. It would be fair to say that the healthcare bill was passed in some great measure by anecdote.
Party is indifferent here. Each party expands government in some way or fashion, the only question is where they aim their sights. We can agree that this guy is about as knowledgeable about financial risk as the cashier at my local currency exchange, but that has little to do with his political affiliation or leanings. If I recall correctly, when conservatives were in power they outlawed online poker to protect me from myself. They also attempted to introduce an amendment to ban gay marriage even when several of them were closet homosexuals themselves.This is why I don’t like discussing politics, eventually it’ll come down to which side you’re on. Conservatives always point the finger at liberals, liberals always point at conservatives, nothing ever gets done and the people get trapped in the middle suffering.
Not to pick an argument with you but you have identified what I think is the most troubling element of modern politics — the tendency to adopt and adhere labels to individuals without really understanding their politics or governance philosophy.I am wildly supportive of education from the perspective of availability, funding and technical rigor. I graduated from VMI and have an Ivy League grad degree funded by the GI bill.I am a veteran having served with elite units and am wildly skeptical of the General officer corps — particularly the politically astute Generals — as well as being an advocate for massive cuts in arms development and arms sales. On the other hand, I am in favor of the creation of 20 new Army and Marine divisions both for manpower and unemployment purposes. This would take 5-700,000 men off unemployment and can be easily reversed 3-4 years form now as enlistments expire. Low hanging fruit.I am against both abortion and the death penalty believing my opposition is based upon fear — don’t want to take the chance of being wrong as it relates to life — and consistency.I am in favor of a strong defense noting my skepticism above, an active engaged foreign policy but am adamantly opposed to international arms sales as every despot eventually uses his toys.I am not particularly worried about Iran and its nukes though I would engage in as much intrigue as possible to topple that regime. I think we have gone a notch too far in our support of Israel who I view as the weekend visitor who has outstayed his welcome. Allies nonetheless.I am in favor of nuclear disarmament because I know our reliability approaches 100% while our opponents is at about 50%. We used gold terminals and they used copper.I would use a tactical or theater nuclear weapon against anyone who attacked our nation in a NY minute particularly if they did not have a viable delivery capability.Any time we were provoked by a foreign country militarily, I would put a 200′ crater in the center of every runway of their largest international airport — easy target, not very casualty intensive but very, very noticeable by the world. Would not be misunderstood by over subtlety.I think we can balance the Federal budget. Hell, Eisenhower did it for 8 straight years while keeping us out of war, building our nuclear arsenal, initiating the Interstate Highway system and playing a whole lot of golf. Trade school grad.So am I a liberal, a conservative, a nut? I think all three.
I don’t think it is a matter of government per say- I think we have to face a reality where large institutions (governments, companies, non-profits) are going to get large or alternatively small groups are going to enter constantly shifting alliances to not-permanently get large in order to be able to fight battles such as this bill. Truthfully, this bill is a cross border, multinational issue. It isn’t like startups only exist in the US, or our funds don’t get foreign money. Only large organizations could really fight back against something else this mammoth.
I don’t think Government naturally seeks to expand. Its people who naturally wish to expand power. Private or Govt. Corporations the same thing. Plus everyone wants to be in the spotlight and as you well know Jack has not been in the spotlight. Not on anything. He sees his colleagues in both houses saying crazy stuff and getting in the news. He wants his turn and ran out of things to talk crazy about since everything has been taken!And I agree with Fred this is just an idiot, Obama would never support this. Especially since the cover of today’s Bloomberg Business Week is declaring Obamanomics a success story. I don’t think he would risk ruining his legacy when he constantly preaches the countries dynamism.
Howie, just joking, but exactly what country are you talking about?
I’ve gotten mugged and I can’t say my politics really have changed. No there is more to it than that- there is a fundamental shift afoot in the way we view money and risk now.
I have no idea about the politics or politicians involved… so this is probably an easy game for me to play!What if you give the Senator credit for not being stupid? Couldn’t it be that he knows that “The only systemic risk the VC business is creating for the financial system is attempting to put the current one out of business…” and that he is directly and/or indirectly invested (heavily?) in the current financial system… and that he is scared … and doing exactly what you are… fighting back?What if there is a big war-to-the-death being fought right before your eyes? A war between antiquated social patterns and newer intellectual patterns? What if you are inevitably on the winning side and the senator on the losing side?There are some inspiring martial arts schools (ironically, very antiquated ones!) that teach that when striking down your opponent you should also protect him, because in the aftermath, when you have won, you will still have to live together – preferrably in peace.I believe the senator sees you coming and he is pulling unproportionally big guns on you because he already knows (but cannot admit) that he is outgunned. Don’t be blind and speechless. Be proud and compassionate – have mercy on your enemies!From what little I know about the USA – that Senator represents a huge part of your society – many of which don’t even know what the letters “VC” stand for. You cannot go into the future and leave them behind. You need your senator and his likes to help you move forward. It’s a huge challenge, and the responsibility for it falls on the stronger/winning combatant!
That was awesome Ronen 😀
100% correct. Senator Reed is off his rocker on this. What if a big fund failed to return capital? I can’t see how our economy would be imperiled in any way.
Fred, I’m speechless that your speechless. You didn’t see this coming? Really? The Obama Administration and the current Congress have been about one thing and one thing only – complete control of individuals in every aspect of our lives through big government.You think $30 million is small? Welcome to your house: http://bit.ly/9katUGFred, you get what you vote for.
Oh pleaseThis is not coming from the administration
damn boss you’re catching some serious heat in this thread from the soetoro bashers…..political beefs, twitter beefs….it’s tough being fred wilson these days! but hey, no one said it was easy being the boss!
Fair play!It is NOT coming directly from the White House.It is however coming from the governance philosophy which emanates from the White House which is to control everything while redistributing the wealth and creating a reliabily voting nanny state body of supplicants while perpetuating the fiction that the creation of jobs is a priority.There is something obscene about a governing philosophy which has the bottom half of the populace not paying any taxes and calling a “tax cut” the receipt of a check funded by the top half of the populace.Is it anything other than redistribution when the top half pays taxes and the bottom half pays no taxes and then gets a check funded by the top half?That philosophy is surely coming from the administration.
Dead straight.I’m not one to make slippery slope arguments on everything. But it’s instructive to remember what one pollster told me: “when independent voters are told about an initiative that President Obama or his Democratic majority is proposing, they usually don’t know what it means. They just know it likely involves massive amounts of (a) new government spending, and (b) centralized government control.”That’s the lens independent voters are viewing every one of his initiatives through, and it’s because the President has given them every reason to believe that.In hindsight, it’s easier to see. It would be hard for an Alinsky-trained community organizer to have any idea of how the free market works or have free market tendencies.
Read this article from July 2009 Fred – http://bit.ly/cYW4n Pay particular attention to the 4th paragraph, 1st sentence:This week, the Obama administration proposed legislation similar to Reed’s bill.Click on the link in that sentence.I stand firm in my statement. It is coming from both the Obama Administration and this Congress. I would also agree with JLM. This is the philosophy that Obama is using for his “fundamental transformation” of America.Every American has the freedom of choice to ignore; with that choice comes the consequences.
i’ve talked to the administration. they know that regulating $30mm venturefunds is nuts
I can’t trust ANY administration who says they know that regulating $30mm venture funds is nuts yet introduces the very legislation that does so. It’s still up on their site to this day: http://bit.ly/cjl1NOHR 3818,‘‘Private Fund Investment Advisers Registration Act of 2009″, amends the Investment Advisers Act of 1940. I’m going to specifically refer to certain sections for the purpose of this discussion:In Section 3 of H.R. 3818 it provides for the elimination of the Private Adviser Exemption in the Investment Advisers Act of 1940.”Section 203(b) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3(b)) is amended” (changes are in bold):”(b) Investment advisers who need not be registeredThe provisions of subsection (a) of this section shall not apply to(1) any investment adviser, except an investment adviser who acts as an investment adviser to any private fund, all of whose clients are residents of the State within which such investment adviser maintains his or its principal office and place of business, and who does not furnish advice or issue analyses or reports with respect to securities listed or admitted to unlisted trading privileges on any national securities exchange;”Also in HR 3818 is an exemption for Venture Capital Funds. Let’s look closely at that exemption:SEC. 6. EXEMPTION OF AND REPORTING BY VENTURE CAPITAL FUND ADVISERS.Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3) is amended by adding at the end the following new subsection:‘‘(l) EXEMPTION OF AND REPORTING BY VENTURE CAPITAL FUND ADVISERS.—The Commission shall identify and define the term ‘venture capital fund’ and shall provide an adviser to such a fund an exemption from the registration requirements under this section. The Commission shall require such advisers to maintain such records and provide to the Commission such annual or other reports as the Commission determines necessary or appropriate in the public interest or for the protection of investors.’’So VC are exempt based on the definition that the Commission decides upon. The Commission also requires VC fund advisers to maintain records and provide reports as the Commission deems necessary at their discretion.This isn’t an exemption. It’s a directive with plenty of ambiguity to let the Commission do as they please with VC going down the road.Fred, you are one of the smartest and most influential VC people out there. I respect you tremendously. I believe you’re spot on in saying that individuals, not government, will “reinvent the way financial services are provided to consumers this decade”.What I am strongly suggesting to you is that no matter who you talked with in the Administration or Congress, what they’re saying to you and what they are doing are two entirely different things. You should use your influence and expertise to ensure that this over reaching into the free market doesn’t see the light of day.One last item – It doesn’t matter if this Administration or Congress were Republican or Democrat. I would be writing the exact same comments to you.
Comments like this make me want to start a blog to vent my frustrations.Luckily I believe these are rather empty words. These comments are very populist which is very good for a politician. Will something like this pass? Most likely not.You can’t control the emerging, disruptive technologies. The VC’s are closest to predict what would be successful, but even they can’t do it very well. The “risk” cannot really be computed based on the funds invested. You have to look closer at each single small investment. Because of this, any thresholding doesn’t make sense (including $30M) Moreover the risk is not to the funds invested or the companies supported, but rather to the existing companies which generally are disrupted by the new ones. This risk is real, and it goes beyond the financial sector. More important for politicians, it may redefine how people get elected, how they spread their name, how they raise money and how to behave in general. I understand how it may be scary for those in power, because start-ups in general want to change the status quo. Fortunately, policies of these type will not pass in a country that prides on its entrepreneurship and small business environments.
Hey Mihal, start blogging. If your comment is any signal, your blog will be excellent.
No surprises here. At least these guys are consistently clueless.Nathan Solomon posted a comment on the nextNY forum a few weeks ago with links to these blogs about section 926 of the proposed bill:http://www.huffingtonpost.c………http://stevewelch.tumblr.co………”If left in the Financial Reform Bill, section 926 would;1) Require companies taking Angel Investments or certain types of Venture Investments to fill with the SEC. Anyone who has had to work with the SEC will tell you this will be a time consuming and frustrating process. Simply put this will be nothing but a burden on early stage companies.2) The provision will double the net worth required to be an accredited investor from one million to two million. This will significantly reduce the amount of people that are legally allowed to be Angel Investors.”Sen. Dodd is allegedly in charge of this bill. His contact info is:DC: 202-224-2823 CT: 800-334-5341The Senator’s twitter account is: @SenChrisDodd (use #pull926 as a hash)I’d recommend calling Dodd’s office regardless of whether you live in CT since he’s the head huncho on this bill.
Jack Reed seems pretty misinformed. Systemic risk really comes about when you have credit bubbles, because presumably both the companies borrowing and the banks lending are affected — which in turn affects the broader economy via bank failures.With the bulk of VC funding in the form of equity investments, there really is no systemic risk. In one of his writings, Nassim Taleb mentions this when he explains why we just had ‘The Great Recession’ and why the dot com bubble did not create the same level of damage and fallout.
What do expect when we elect a bunch of socialists to Congress and the White House. If you haven’t figured it out yet, the current administration wants to run your life Fred. We elected them, now we need to throw them all out, put in term limits and SHRINK the government.
“Then they came for the VCs…” LOLIt is a small world. I knew Jack Reed on active duty in the early/mid 1970s in the 82nd ABN. He was a platoon leader, company commander and a Bn S-3 (plans and operations). He was a damn good soldier and was as solid as a rock and was not some squishy liberal presence.Underneath whatever weirdness this episode suggests, is a good man.Of course a lot changes in 38 years.He has a couple of degrees from Haaaaaaaahvad and has drifted leftward as would any Dem from Rhode Island. It’s in the water up there.Here’s the most important thing — this administration appears to be inclined to combine class warfare with an incredibly controlling philosophy of governance — making war directly against the entrepreneurial, job creating segment of America.Unfortunately that segment of society is also the only ones who can create the jobs which are so desperately needed by America today.In politics, you don’t get what you deserve, you get what you vote for. Elections matter.When you control everything, you control nothing.
That’s a great alternative perspective on Jack Reed, appreciate it JLM.I’m gonna chew on that last line: “When you control everything, you control nothing.” while I work on some code.
I think another way to say it is this: eventually the weight of taxes and regulation and control kills the goose. And then there are no more golden eggs.
Funny you should use this analogy. Is this a statement on us or on the government? The government is there to support our common interests. To the extent that we can portray that our interests are in common with the rest, that is the extent to which we reduce regulation.wikipedia:A man and his wife had the good fortune to possess a goose which laid a golden egg every day. Lucky though they were, they soon began to think they were not getting rich fast enough, and, imagining the bird must be made of gold inside, they decided to kill it. Then, they thought, they could obtain the whole store of precious metal at once; however, upon cutting the goose open, they found its innards to be like that of any other goose.MoralsGreed destroys the source of good.Think before you act.Those who want too much lose everything.
The forces of big business subverting the free market to serve their own interests are equally as dangerous as government when it comes to killing the golden goose.The free market works – when big business and big government are restrained and let it work.
I feel you have just framed the entire debate. How do we define big government and big business so we can put limitations into law? We have laws to protect us from ourselves. It seems as though we need laws to protect big business and big governments from themselves. The founding fathers thought of this nifty system of checks and balances but they forgot to limit the size of the players.As an aside; I suggest free markets work when they are responsible to and respond to feedback provided by the communities they serve. The popular philosophy of every man for himself does not scale to such large populations as we must now manage.
I prefer to keep it simple. Government should ensure that all businesses (a) tell the truth, (b) do what they said they were going to do, and (c) compete fairly in the marketplace.It’s both (c), and an absence of special interest regulations that favor big business over small, that keep big business from subverting the free market.As for limiting government, it’s all about keeping their role to (a), (b) and (c).
JLM- I agree that elections matter, but these days it seems that primary elections matter more. While I agree that Obama was young and inexperienced, I’m quite sure I would vote for him again over McCain (very limited understanding of the economy) and Palin (not sure which adjective to use, “dumb”; “criminal”; or “hypocrite”). And I’m pretty moderate. I just keep wondering where the moderates go, unfortunately they can’t win a primary.
Does anyone know how many funds there are at the $30mm and below level, or how much money they manage in total? Alternatively, how much money invested each year in the US comes from funds at this small scale?Knowing the size of the system (instead of the size of a single actor in it) is critical for understanding the “systemic risk” of that system.
Those who can, do. Those who can’t, govern.Another shining example of a Politician without a clue. They’re on both sides of the aisle.I dare to dream big: a strong center with people who actually know what they’re doing.A good example of “no conflict, no interest.”
In free markets you have to maximize utility.In politics you maximize damage.
Wow is right. In addition to not making policy sense, it is also nonsense politically. 99.99% of people don’t know and don’t care about VC; anyone who does will be as mad as you are about this. And this is the second time he’s trying it?!
Those 99.99% may not know about VC, but when they see the term will equate it with banking, which is probably not a popular term with the masses at the moment.
While banking should probably do a little rethinking, it isn’t all that bad. Part of recognizing systemic is recognizing you are part of the system. And while you should always work on bettering yourself, doesn’t mean you shouldn’t get rid of the good parts either. The hard part of right now: Sorting through the good parts, since we’re not sure how the system completely works…
In trying to clean up the mess of the past decade and more, they are going after the wrong people, the people who will create the next 10 million jobs and more.”….entrepreneurs will use technology to reinvent the way financial services are provided to consumers this decade….”This is the part of the blog post that shouts at you. This is the hope.Venmo makes PayPal look old.
“I believe entrepreneurs will use technology to reinvent the way financial services are provided to consumers this decade”Would love to read a future post on this with your perspectives.
I agree with your position. I think Private Equity is much more to worry about since they normally loot companies if they can and let them sink after the profit has been made (see Circuit City for example).And for any suckers that don’t do due diligence before buying an IPO (see Pets.com) that is their fault.And when it comes to job creation VC backed companies hire more workers than the S&P 500 companies do each year.
It has nothing to do with managing systemic risk. This is called socialism, where the state regulates and controls anything that moves. In case anyone missed it, America is a socialist nation; you can expect the federal government to be involved in everything. It’s about power, taxation and control. It’s not complicated to figure out. Take one look at the infinitely expanding monster in DC, and it gets real clear. Isn’t this what people have been voting for, for decades now?
FredAre you really surprised the the government wants more involvement in business? And is using FUD to accomplish that?Nah, this is par for the course.
It was Reid, now Reed. There isn’t a question in my mind that Chief Statist Command-and-Control Obama is committed to getting the Federal government tightly involved in everything. And regarding your desire for Net Neutrality, wait until you get your wish: It’ll be the beginning of a slippery slope that will eventually get the Feds doing social engineering like they do now with broadcast media: Federal lawyers deciding if a company owns “too much” in a market, equal-time rules, the stupid law that results in those atrocious programs running 7pm-8pm (“Access Hollywood” and so on), etc. etc. We are becoming France!
Normally, I would find this story amusing, but the potential result from uniformed pressure on the SEC is fast becoming a socio-economic liability for our financial system.
It’s a shame human nature is all about over reaction and over correction, always swinging the pendulum too far in each direction. This is why stock market cycles, and private venture valuations, are far wider swinging than the underlying economic shifts. Why regulations and re-regulations move in such extreme directions every other decade, and why most public policies are myopic and focus on solving recent problems and not macro structural problems.This one is a classic example of stupidity in motion.
does any body have an idea what share of the entire stock market is attributed to VC backed companies? and if we take only companies established in the last decades?
that’s a really good question. i’d love to see that data too if anyone can find it.
There is some great irony when an industry which is funded in great part by money “folks can afford to lose” and which admits right up front that approximately one third of its investments will be total failures, could ever trigger a systemic failure of anything. Anything.Further it is an industry which is almost impossible to “mark to market” and value in a snapshot.Finally, having run public SEC reporting companies for over a decade in my business career, I can say with some certainty that SEC regulation and reporting is really just an annoyance rather than an impediment. The real mischief is in the rules themselves such as the definition of “accredited investors”.
In a rational world, the burden of proof would be on Jack Reed to show that a $30M VC fund presents a “systemic risk” to a $14T economy. If he can show this to be true, than our economy is at risk from *any* entity controlling more than $30M, including individuals and privately held companies.
It’s a Parkinson law world: time spent on an issue is the opposite to it’s significance. Nobody can conceive 14T, so why not deal with 30M?
It’s not uncommon for people who speak on topics in which they have no knowledge tend to say something that makes no sense.Unfortunately, politicians do this a lot. Speak on things they no nothing about.
To get back to “No Conflict- No Interest”No Conflict, no long term growth.We’re rethinking the way money works in this country. We’re rethinking the way it works in society. That’s a big deal. I never thought that would happen.And while I feel like Senator Reed is grasping at straws, I don’t blame him for trying. It’s a big mucky money system we have, and it needs sorting through. And it doesn’t work. And very everyday people are more than a little pissed off.The case has to be made that basically the money is used to build companies that hopefully will be around for a while. The Next Raytheon, if you will or GE. Or Facebook. We just don’t know about how society really works to tell what that company will be.The finance system needs to be regulated around that idea: we want to build: debt for some people is not bad (if you are building a growing small business and will be able to handle it, that may be good). Clarity on the message and showing real lives that have changed regularly is a much more powerful case about regulation than any other way of advocation.*And there are stories- find them and show them. Show how lives are changed for the better with these companies. Put them on camera, and make politicians watch smiling people. it’s hard to say no to happy people.*The best case I can give for this, as much as JLM will hate me for it, is that every year around the time of the Anniversary of Roe V Wade, you see a ton of people pass around links of women who testify about the experience of having an abortion, the circumstances, and how it changed them. You also tend to see things like showings of movies about stuff like the Jane Collective too: It’s hard to make a very theoretical case when you see and hear these stories. Especially when you see the numbers of people.
What do you think he will answer if I ask him “Are small businesses are critical to Amercian growth?”
You’re speechless that a senator made an idiotic comment?
Reed is fucking nuts.
Avoiding specific attacks on specific individuals, let’s look at it from a business (i.e. incentives) perspective:1) Politicians (of any stripe) are largely in favour of status quo, VC-backed firms are in favour of disrupting the status quo. 2) Politicians (of any stripe) are always in favour of their financial backers. These backers – the stereotype is union for Democrats and big business for Republican, but these don’t always hold – are the existing organizations threatened by the change that VC-backed companies bring in. No small VC-backed firm is spending money in lobbying or donating to election campaigns; their investors would (rightly) have their heads if they did.There is also the issue of another source of revenue, and that many of them may not understand VC, but I think this is secondary.In essence, politicians are simply and rationally following their incentives in office and of their backers in attempting to regulate the VC industry.I hate to say it, Fred, but you are being naive if you expect a politician to do what is good for constituents and the country and bad for the politician him/herself. Change his/her incentives, you will change their behaviour. Does the VC industry even have a lobbying arm?
Fred- we could be the “poster child” for $30 to $40m aum funds, would be pretty easy to refute how small our LPs investments are as a total of investible assets/net worthHow do we get involved ?
Rhode Island is quite seriously one of the most depressed states in the union. If any state would benefit from VC and small-fund start-up/incubator activity, it would be Rhode Island.Because of this, I find it shocking that they would be going after small funds. This, coupled with what has been proposed on the angel side and it looks like this bill would crush those who put it all on the line to create new jobs.The President has challenged America to create jobs. If it is new innovative businesses and jobs we are endeavoring to create, there will always be risk in that endeavor. I think “systemic risk” is a little harsh.
Regulation is systemic risk.
I’m shocked that government official would suggest the $30MM level. That’s well below the rounding errors on many government contracts. Why don’t we regulate those first.
The very idea that $20-50B, with almost no leverage and almost no derivatives, could cause systemic risk is absurd. Now when they start coming after the tax treatment of carried interest, that’s an argument I can get behind.
me tooto the extent you have real cash at risk, then its cap gainsif its sweat, then its income
So in a “typical” fund, where the GPs contribute 1% of the capital, only the returns on that 1% should be cap gains.
yes, but i wouldn’t get hung up on the percentageswe are also LPs in our fund in addition to our GP commit and own a lot morethan 1% of the fundso i would just say that to the extent the GP’s have made capitalcommitments to the fund, they should get cap gainsany carried interest in addition to their capital interests should betreated as ordinary income
I have been lurking for quite a while on this blog and reading the comment section soaking it all in. I think that the discussion from this post that is most important is the idea that innovators are out their working on ideas that disrupt the current financial systems (insurance, banking, investments, etc) and I am much more interested in hearing about these. Financial instituatuons are old and out dated, they have failed us too numerous times to mention. So who are the disruptors out there right now- I could not think of any?
Venture Capital in ArgentinaVenture-capital Venture capital in Argentina, particularly at an early stage, requires an active participation in the running of portfolio companies. One can argue that VCs practically play the role of entrepreneurs. In other words, there is no room for “dumb money”. Venture capital, for various reasons outside the scope of this piece, has to be “smart” i.e. has to be complemented with experienced management and has to have a wide network of contacts.For free access to full content visit:http://www.alternativelatin…
Hi Fred,Don’t know if you or anyone else will see this @ #161, but I would like to get an idea of what people & ecosystems there are for the kind of finance innovation you’re talking about. At the very least I’m curious. Thanks