Last month the House overwhelmingly approved a package of rifle-shot changes to financial services laws, but competing priorities and election-year politics are complicating its consideration in the Senate.
Dubbed the JOBS and Investor Confidence Act, or JOBS Act 3.0, the legislation is designed to facilitate capital formation for early-stage companies and to incentivize them to list on public exchanges. The bill won House approval 406-4.
It follows separate legislation enacted in May that rolled back provisions of Dodd-Frank, which opponents said were burdening community banks and credit unions while stifling lending to small businesses. House Financial Services Committee Chairman Jeb Hensarling, R-Texas, agreed to move that bill only after he said he received assurances the Senate would vote on what became JOBS Act 3.0.
But it’s not clear that the new capital formation bill – despite its near-unanimous support in the House – can gain traction in the Senate before the midterm elections in November.
While the earlier legislation to chip away at Dodd-Frank won bipartisan Senate support, its coalition was fragile. The 16 Democrats who broke with their leadership to vote for it later came under withering criticism from liberal and consumer advocacy groups – and even from colleagues, including Sen. Elizabeth Warren, D-Mass.
Can Senate leaders re-create that bipartisan coalition for JOBS Act 3.0? Will Senate Democratic leaders – less than 100 days from the midterm elections – agree to a bipartisan financial services bill?
Hensarling is making the case (registration required) to senators that additional regulatory relief in the financial services industry is needed to spur economic growth and job creation. A meeting last week between Hensarling and Sen. Sherrod Brown, D-Ohio, the top Democrat on the Banking Committee, may indicate Senate Democrats have interest in the House package.
Among other provisions, JOBS Act 3.0 would provide legal certainty to angel investors and entrepreneurs by allowing them to interact without violating securities laws, Hensarling said. It aims to reduce the millions of dollars in compliance costs required to file for an IPO, allows companies to go to the Securities and Exchange Commission for confidential reviews before publicly filing IPOs, and permits companies to meet with accredited investors to gauge interest before committing to a public offering.
JOBS Act 3.0 also would create new exchanges to trade venture company stocks and increase the pool of capital for small companies by adjusting the requirements for so-called accredited investors. Hensarling, who is not seeking re-election this year, said collectively these reforms would help maintain economic growth and U.S. competitiveness.
“By helping entrepreneurs access the capital they need to launch their companies and to go and stay public, this bill ensures that America’s garages have fewer old cars and more new startups,” Hensarling said. “The small businesses of today become the Amazons, Googles and Microsofts of tomorrow.”
Still, Senate Majority Leader Mitch McConnell, R-Ky., has offered no public commitment that JOBS Act 3.0 will see a vote in the Senate. McConnell is dedicating Senate floor time to approving Trump administration nominations, particularly judges, and passage of annual spending bills in advance of the 2019 fiscal year, which begins Oct. 1.
That’s not stopping Hensarling from continuing to lobby the Senate to finish the job and pass his JOBS Act 3.0. The subhead on Hensarling’s recent Wall Street Journal op-ed was “The Senate should act now [or] get out of the way” (registration required).