The Shadow Financial Regulatory Committee (an independent committee of experts sponsored by AEI) released its latest findings at a press luncheon on Monday. The committee published two new statements, the first of which critiques the U.S. Department of the Treasury’s new cost estimates for the Troubled Asset Relief Program (TARP). The second statement approves the Jumpstart Our Business Startups (JOBS) Act.
The committee cited four fundamental errors in the new cost estimates for TARP, presented by Edward Kane of Boston College: First, the Treasury wrongly deducts Federal Reserve interest revenues in its cash-basis analysis. Second, the cash-basis calculation of cost ignores the projections of the special inspector general of TARP. Third, it is inappropriate to measure taxpayers’ costs on a cash basis. And last, the Treasury asserts—but does nothing to show—that the benefits and net gains to society from the program were large. The committee warned the Treasury against misleading the public with false claims of bailout profits and clever policymaking and urged it to be honest about the true costs of each rescue program.
Chester Spatt of Carnegie Mellon University then presented the committee’s statement in favor of the JOBS Act. The act relaxes restrictions on raising investment capital for emerging growth companies, or companies that are in the first five years of their initial public offering. It also raises the cap on “Regulation A” offerings from $5 million to $50 million and lifts the number of record shareholders privately held companies can have before they must go public from 500 to 2,000.
Finally, the JOBS Act exempts certain “crowd-funding” transactions from the Securities and Exchange Commission’s (SEC) registration requirements. Although the chairman of the SEC has criticized the JOBS Act for weakening protections for investors, the committee stated that the SEC’s objections are not well-grounded or offset by the act’s benefits.
The Shadow Financial Regulatory Committee (SFRC) is a group of publicly recognized independent experts on the financial services industry — including experts in banking, insurance and securities — who meet regularly to study and critique regulatory policies affecting this sector of the economy. During two closed sessions before the luncheon, committee members will discuss the latest in financial regulation issues, including Basel market risk capital requirements, the Dodd-Frank Act, Securities Exchange Commission issues and accounting issues. At a luncheon briefing following these sessions, SFRC members will give several statements and answer questions related to the topics at hand.