Today the Senate will vote on the JOBS Act, part of a deal on judicial confirmations that allows the House-passed bill to come to the floor. The Senate will vote on a substitute amendment that includes a reauthorization of the Export-Import Bank, which could upend the entire bill. And let’s hope so! As Simon Johnson points out, the JOBS Act is a simply terrible idea for a bill, one which, in the aftermath of the biggest ripoff of investors in history with the housing bubble, strips investor protections and deregulates the financial sector.

The idea behind the JOBS bill is that our existing securities laws – requiring a great deal of disclosure – are significantly holding back the economy [...]

Perhaps the worst parts of the bill are those provisions that would allow “crowd-financing” exempt from the usual Securities and Exchange Commission disclosure requirements. A new venture could raise up to $1-2 million through internet solicitations, as long as no investor puts in more than $10,000 (section 301 of HR3606). The level of disclosure would be minimal and there would be no real penalties for outright lying. There would also be no effective oversight of such stock promotion – returning us precisely to the situation that prevailed in the 1920s.

This might well pump up the value of particular stocks – that was the experience of the 1920s, after all. But ephemeral stock market bubbles are not without real consequences. The crash of 1929 was made possible by the lack of constraints on what stock promoters could say and do. Combined with excessive leverage, this led directly to the Great Depression.

We’re supposed to be surprised that initial public offerings (IPOs) are down during the biggest financial collapse since the Great Depression, and that public policy must ensure that more IPOs get generated, at the expense of investor protections. What’s more, experts on IPOs don’t believe this bill will lead to more capital formation or stock offerings from startup companies. Instead, it will let lots of companies to opt out of reporting requirements and leave investors with unverifiable or inadequate information.

Go to ten people on the street – go to ten people on Wall Street – and ask them if securities laws created the economic crisis, and only their abolition can bring America back to prominence and prosperity. And before you curse the damn Republicans for selling out to the finance lobby again, consider that only a couple dozen Democrats voted against the JOBS Act in the House, that Chuck Schumer is pushing this bill along in the Senate, it was initially a Democratic bill written by Rep. Jim Himes, and that the White House supports it.

Johnson calls it “legislative madness.” The investor protections that Carl Levin and Jack Reed want to add ameliorate the bill somewhat, but considering the purpose of the enterprise is to deregulate the financial markets, I don’t see why you would pass it under any circumstances.