If you’re not Goldman Sachs, says Steven Rattner, you ain’t squat:
Most troublesome is the legalization of “crowd funding,” the ability of start-up companies to raise capital from small investors on the Internet. While such lightly regulated capital raising has existed for years, until now, “investors” could receive only trinkets and other items of small value, similar to the way public television raises funds. As soon as regulations required to implement the new rules are completed, people who invest money in start-ups through sites similar to Kickstarter will be able to receive a financial interest in the soliciting company, much like buying shares on the stock exchange. But the enterprises soliciting these funds will hardly be big corporations like Wal-Mart or Exxon; they will be small start-ups with no track records.
And God, or Robert Reich, forbid that small investors should actually own anything, am I right?
Write this down and memorize it, Rattzo: “Too big to fail” is the functional equivalent of “too big to be useful,” and will remain so just as long as Wall Street’s sole interest is the care and feeding of Wall Street.
Oh, and before you express your oh-so-sincere concern about all us player wannabes, you might consider this from Warren Meyer:
I predict that over [time] that Internet entrepreneurs running such crowd-sourcing sites would develop reputation management and review tools for investors (similar to those at Amazon and eBay). Over time, it may be that these become far more trustworthy than current credit agency reports or investment bank recommendations. After all, which do you trust more a 5-star Amazon review with 35 responses or a Goldman Sachs “buy” recommendation on an IPO like Facebook or Groupon? Besides, it would take a very long time, like eternity, for fraud losses in a crowd-sourcing site to equal 1/100 of the investor losses to heavily regulated Bernie Madoff.
Consider yourself downgraded, Rattski.