[corp-focus] Learning from Facebook
Robert Weissman
rweissman@citizen.org
Wed, 23 May 2012 14:07:08 -0500
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Learning from Facebook
By Robert Weissman
May 23, 2012
Whether or not you're an investor, it's important to grasp the significance=
of what's happened with the Facebook initial public offering (IPO).
In the few days since its IPO, Facebook's stock price has fallen almost 20 =
percent amidst news that underwriters led by Morgan Stanley and perhaps Fac=
ebook itself shared negative assessments of the company only with big, inst=
itutional investors -- not with the broader investing public.
It's going to take some time to suss out exactly what happened with the Fac=
ebook IPO, but step back and consider the broader implications. They are st=
aggering.
The most hyped IPO in history has turned into a debacle marred by insider d=
ealing. It's no exaggeration to say the whole world was watching -- and sti=
ll the decks were stacked against average investors.
This is remarkable commentary on the untrustworthiness of Wall Street. If a=
nyone had any doubts, it shows the utter folly in relying on Wall Street to=
police itself.
What's that you say? Oh yes, that's right, Congress did just pass and Presi=
dent Obama eagerly signed legislation -- the misnamed JOBS Act -- to reduce=
regulatory oversight of Wall Street and the launch of IPOs. It aims to mak=
e it easier for new companies to launch IPOs without providing detailed inf=
ormation about their operations to investors. Whoops.
At the time the bill was under consideration, critics (including Public Cit=
izen) suggested the JOBS Act was basically pro-fraud legislation. "The legi=
slation is premised on the dangerous and discredited notion that the way to=
create jobs is to weaken regulatory protections," wrote a public interest =
coalition headed by the Consumer Federation of America and Americans for Fi=
nancial Reform. The legislation would "roll back regulations that are essen=
tial to protecting investors from fraud and abuse, promoting the transparen=
cy on which well-functioning markets depend, and ensuring the fair and effi=
cient allocation of capital."
The JOBS Act was an assault on common sense at the time it was passed -- ha=
s the Obama administration and Congress really forgotten that the Wall Stre=
et crash that threw us into the Great Recession was caused in significant p=
art by regulatory failures? -- but it looks even worse this week than it di=
d at time of passage.
It's not too much to take from the Facebook debacle -- along with other smo=
ldering scandals, like the JPMorgan Chase multi-billion dollar derivatives =
loss and the accounting mess at Groupon -- broader lessons than just that t=
he JOBS Act was a horrendous mistake.
First, we need tougher not weaker controls on Wall Street activity. That me=
ans, at minimum, that we need aggressive and rapid implementation of the Do=
dd-Frank Wall Street reform legislation, including the Volcker Rule that ai=
ms to limit the speculative betting of big banks.
Second, and more generally, Big Business cannot be trusted to police itself=
. We need strong health, safety, environmental, financial and other regulat=
ory protections, with well-resourced regulatory cops on the beat and citize=
ns empowered to enforce the rules that regulators fail to apply.
These are simple lessons that you'd expect a child to understand. In Washin=
gton, though, these lessons are willfully forgotten and require constant re=
affirmation. Well, the Facebook episode has done that once again.
Robert Weissman is president of Public Citizen, <www.citizen.org>.
This article is posted at: <http://lists.essential.org/pipermail/corp-focus=
/2012/000348.html>.
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</o:shapelayout></xml><![endif]--></head><body lang=3DEN-US link=3Dblue vli=
nk=3Dpurple><div class=3DWordSection1><p class=3DMsoNormal style=3D'margin-=
bottom:0in;margin-bottom:.0001pt'>Learning from Facebook<o:p></o:p></p><p c=
lass=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'>By Rober=
t Weissman<o:p></o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;ma=
rgin-bottom:.0001pt'>May 23, 2012<o:p></o:p></p><p class=3DMsoNormal style=
=3D'margin-bottom:0in;margin-bottom:.0001pt'><o:p> </o:p></p><p class=
=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'>Whether or n=
ot you're an investor, it's important to grasp the significance of what's h=
appened with the Facebook initial public offering (IPO).<o:p></o:p></p><p c=
lass=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'><o:p>&nb=
sp;</o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:=
.0001pt'>In the few days since its IPO, Facebook's stock price has fallen a=
lmost 20 percent amidst news that underwriters led by Morgan Stanley and pe=
rhaps Facebook itself shared negative assessments of the company only with =
big, institutional investors -- not with the broader investing public. <o:p=
></o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0=
001pt'><o:p> </o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in=
;margin-bottom:.0001pt'>It's going to take some time to suss out exactly wh=
at happened with the Facebook IPO, but step back and consider the broader i=
mplications. They are staggering.<o:p></o:p></p><p class=3DMsoNormal style=
=3D'margin-bottom:0in;margin-bottom:.0001pt'><o:p> </o:p></p><p class=
=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'>The most hyp=
ed IPO in history has turned into a debacle marred by insider dealing. It's=
no exaggeration to say the whole world was watching -- and still the decks=
were stacked against average investors.<o:p></o:p></p><p class=3DMsoNormal=
style=3D'margin-bottom:0in;margin-bottom:.0001pt'>This is remarkable comme=
ntary on the untrustworthiness of Wall Street. If anyone had any doubts, it=
shows the utter folly in relying on Wall Street to police itself.<o:p></o:=
p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt=
'><o:p> </o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;marg=
in-bottom:.0001pt'>What's that you say? Oh yes, that's right, Congress did =
just pass and President Obama eagerly signed legislation -- the misnamed JO=
BS Act -- to reduce regulatory oversight of Wall Street and the launch of I=
POs. It aims to make it easier for new companies to launch IPOs without pro=
viding detailed information about their operations to investors. Whoops.<o:=
p></o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.=
0001pt'><o:p> </o:p></p><p class=3DDefault style=3D'line-height:115%'>=
<span style=3D'font-size:11.0pt;line-height:115%;font-family:"Calibri","san=
s-serif"'>At the time the bill was under consideration, critics (including =
Public Citizen) suggested the JOBS Act was basically pro-fraud legislation.=
"The legislation is premised on the dangerous and discredited notion =
that the way to create jobs is to weaken regulatory protections," wrot=
e a public interest coalition headed by the Consumer Federation of America =
and Americans for Financial Reform. The legislation would "roll back r=
egulations that are essential to protecting investors from fraud and abuse,=
promoting the transparency on which well-functioning markets depend, and e=
nsuring the fair and efficient allocation of capital."<o:p></o:p></spa=
n></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt=
'><o:p> </o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;marg=
in-bottom:.0001pt'>The JOBS Act was an assault on common sense at the time =
it was passed -- has the Obama administration and Congress really forgotten=
that the Wall Street crash that threw us into the Great Recession was caus=
ed in significant part by regulatory failures? -- but it looks even worse t=
his week than it did at time of passage.<o:p></o:p></p><p class=3DMsoNormal=
style=3D'margin-bottom:0in;margin-bottom:.0001pt'><o:p> </o:p></p><p =
class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'>It's no=
t too much to take from the Facebook debacle -- along with other smoldering=
scandals, like the JPMorgan Chase multi-billion dollar derivatives loss an=
d the accounting mess at Groupon -- broader lessons than just that the JOBS=
Act was a horrendous mistake. <o:p></o:p></p><p class=3DMsoNormal style=3D=
'margin-bottom:0in;margin-bottom:.0001pt'><o:p> </o:p></p><p class=3DM=
soNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'>First, we need t=
ougher not weaker controls on Wall Street activity. That means, at minimum,=
that we need aggressive and rapid implementation of the Dodd-Frank Wall St=
reet reform legislation, including the Volcker Rule that aims to limit the =
speculative betting of big banks. <o:p></o:p></p><p class=3DMsoNormal style=
=3D'margin-bottom:0in;margin-bottom:.0001pt'><o:p> </o:p></p><p class=
=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'>Second, and =
more generally, Big Business cannot be trusted to police itself. We need st=
rong health, safety, environmental, financial and other regulatory protecti=
ons, with well-resourced regulatory cops on the beat and citizens empowered=
to enforce the rules that regulators fail to apply.<o:p></o:p></p><p class=
=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.0001pt'><o:p> <=
/o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.000=
1pt'>These are simple lessons that you'd expect a child to understand. In W=
ashington, though, these lessons are willfully forgotten and require consta=
nt reaffirmation. Well, the Facebook episode has done that once again.<o:p>=
</o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;margin-bottom:.00=
01pt'><o:p> </o:p></p><p class=3DMsoNormal style=3D'margin-bottom:0in;=
margin-bottom:.0001pt'><o:p> </o:p></p><pre><span style=3D'font-size:1=
1.0pt;font-family:"Calibri","sans-serif"'>Robert Weissman is president of P=
ublic Citizen, <www.citizen.org>.<o:p></o:p></span></pre><pre><span s=
tyle=3D'font-size:11.0pt;font-family:"Calibri","sans-serif"'><o:p> </o=
:p></span></pre><pre><span style=3D'font-size:11.0pt;font-family:"Calibri",=
"sans-serif"'>This article is posted at: <http://lists.essential.org/pip=
ermail/corp-focus/2012/000348.html>.<o:p></o:p></span></pre><p class=3DM=
soNormal><o:p> </o:p></p><p class=3DMsoNormal><o:p> </o:p></p></d=
iv></body></html>=
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