Yesterday, Matt Taibbi, contributing editor at Rolling Stone, published an article entitled, “Why Obama’s JOBS Act Couldn’t Suck Worse”. The following is an interview of Matt Taibbi on the subject of the JOBS Act, conducted by Eliot Spitzer on Viewpoint at Current TV on April 9, 2012.
Eliot Spitzer: Last Thursday President Obama signed the so-called Jobs Act. I call it the Return Fraud to Wall Street Act. In his Rolling Stone blog this week, Matt Taibbi points out that not only is the name, Jumpstart Our Business Startups Act, annoying and redundant but also the act itself will invite “a replay of the disastrous tech-stock bubble of the late 1990s.”
Joining me now is a man who will always be famous for one of the greatest metaphors of all time, describing Goldman Sachs as “a great vampire squid wrapped around the face of humanity”, Rolling Stone contributing editor, Matt Taibbi.
Matt, it is great to have you here. Your articles are always spectacular. You have a metaphor here; I will get to it in a little bit but first you have been so critical of this Act. Tell us what people on Wall Street said about this Act.
Matt Taibbi: I had a friend call me up this weekend basically and he didn’t even say anything on the phone…when I answered the phone he was just laughing hysterically uh… basically the upshot of it is that people just can’t believe how far they went in breaking down all the regulations that were enacted after the collapse of the stock bubble in the late nineties. It’s just they’ve gone so far it almost boggles the mind.
Eliot Spitzer: You know, it seems as though our short-term memory has diminished to absolutely nothing. And you hear the President and leaders down in Washington all the time talking about fairness and enforcement, and then they pass a law that effectively repeals half of the meaningful rules that were put in place to prevent another bubble from being inflated. What is their logic? I mean, how do they rationalize this?
Matt Taibbi: It doesn’t make any sense at all because really the stock market was one of the few markets that wasn’t a complete and total disaster and ripe with corruption. And it’s the one place where America still had a relative competitive advantage relative to the rest of the world because investors around the world know that companies that are on the stock market have to conform to some basic regulations and the numbers that they submit are at least in the ballpark of reality. Now all of that goes out the window. Now there is no competitive advantage anymore.
Eliot Spitzer: You give us the examples of this law now saying that new companies with valuations under a billion revenues won’t need to have certified public accountant records to validate their claims. Why did they think that will help people raise money?
Matt Taibbi: It doesn’t make any sense. The analogy that I gave would be like announcing that all baseball rookies would be exempt from steroid testing for the the first five years of their career. Sure, you are going to get a lot of home runs uh…for those first five years but you’re going to have to have a lot of asterisks in the record books afterwards as well. It just doesn’t make any sense. It is completely flawed logic. They really think that if they don’t pass laws like this, that companies are going to flee to other jurisdictions. But the reality is you don’t want a company that’s going to commit fraud to come here so that they can commit fraud.
Eliot Spitzer: When I read the article that actually was the metaphor I just loved. It is just like saying, look for the first five years you don’t need to tell us the truth. You can just tell us whatever you want us to believe, and the example these days is Groupon, which was and is in the midst of an IPO, I suppose. Its accounting has been subject to all sorts of attack. Had this law been in existence, none of those issues could have come to light.
Matt Taibbi: Right, and it places honest companies at an active disadvantage because they’re expending all this energy trying to conform and make all the numbers really add up whereas this other company can just make up all the numbers and go to investors and say “uh… here’s some numbers that we just cooked up and you’re free to believe them or not. So there’s no emphasis now on being honest and actually conforming to the rules.
Eliot Spitzer: Look, Wall Street went down to Washington and lobbied extremely hard to repeal the rules that were working. Political question: why did the President, who was now running as a populist wisely or not, and a Democratic party that is trying to go back to its base and say we are protecting you from the avarice of Wall Street, why did they pass this almost in the dark of night?
Matt Taibbi: It doesn’t make any sense at all. Again politically it makes no sense because Obama is in a position where he basically has an election that he cannot lose: it’s his to lose. The only thing that could really happen is if he makes a mistake. That’s the only way he can lose this election. And here he goes and he hands an issue to the Republican nominee. Basically an opponent can look at this Act and say Obama just gave a gigantic handout to Wall Street and made a return to the fraudulent days of the late nineties possible again.
Eliot Spitzer: And I see such a huge tension between the argument that he’s trying to make—and he has been making it quite effectively—that he’s going to bring back some degree of rigor, some degree of integrity, transparency, to the markets, and then behind the mask of permitting capital formation a bit more rapidly we exempt companies from the obligations to tell us the truth about their financials. I simply don’t see how you square those two arguments.
Matt Taibbi: Sure, it rolls back elements of Dodd-Frank, it rolls back elements of Sarbanes Oxley, it roles back all these important regulations, it rolls back some of the work that you did obviously after the global settlement, all these things that Democrats theoretically have worked for over the past decade; and now it all goes out the window. Why? It doesn’t make any sense.
Eliot Spitzer: And frankly I have never seen any real evidence that those rules prevent capital formation, despite all the rhetoric, despite all the talk from the other side, I have never seen one piece of evidence that substantiates their view.
Matt Taibbi: The best excuse that they’ve given for why they need to eliminate this independent accounting rule is that it costs too much to hire accountants. Are you really going to invest in a company that cannot afford to hire an independent accountant? That doesn’t make any sense at all. That just shows you how dishonest the law is if that’s the real excuse.
Eliot Spitzer: Maybe they should have told that to the victims of the Madoff Ponzi scheme, who also didn’t have an accountant. Maybe we will bring Bernie Madoff back. I guess he was supporting this bill. Who knows. Rolling Stone contributing editor, Matt Taibbi, thank you so much for your time tonight.
Transcribed by The Barefoot Accountant