Simon Johnson: Professor John Coates hit the nail on the head:
“While the various proposals being considered have been characterized as promoting jobs and economic growth by reducing regulatory burdens and costs, it is better to understand them as changing, in similar ways, the balance that existing securities laws and regulations have struck between the transaction costs of raising capital, on the one hand, and the combined costs of fraud risk and asymmetric and unverifiable information, on the other hand.”
In other words, you will be ripped off more. Knowing this, any smart investor will want to be better compensated for investing in a particular firm – this raises, not lowers, the cost of capital. The effect on job creation is likely to be negative, not positive.
via EconoMonitor : EconoMonitor » A Colossal Mistake of Historic Proportions: The “JOBS” Bill.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
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Possibly professor Coates was quoted out of context but as written, his remarks are “academia-speak” with no actual relevance in the marketplace.
He appears to suggest that less regulation will get us “ripped off more” than legislation that might enact more regulation.
Less regulation = less fraud risk and asymetric information? Sorry, but Bush tried that approach and it turned out to be an abject disaster.
My read of this is: Less regulation = greater fraud risk.