Yale professor Robert Shiller delivered a profoundly odd op-ed this weekend arguing that Occupy Wall Street and promoters of “financial innovation” have the same goal in mind, to “democratize” Wall Street. He picked up from his students some positive chatter about “crowdfunding,” where small investors seed startups with capital over the Internet, and he turned it into a strong endorsement. But there’s a long logical step from Kickstarter to turning the current platform of securities law into a Wild West show without protections for the average investor from stock scams. You have to be a real idealist to uncritically believe that things like crowdfunding will only deliver “much good to society” over time.

Matt Taibbi is not one of those idealists. And he went off on the JOBS Act, which includes those crowdfunding provisions, presenting an overwhelming counterpoint to Shiller’s optimism.

In fact, one could say this law is not just a sweeping piece of deregulation that will have an increase in securities fraud as an accidental, ancillary consequence. No, this law actually appears to have been specifically written to encourage fraud in the stock markets [...]

…the big one, to me, is the bit about exempting firms from real independent tests of internal controls for five years.

When I first read this, I asked myself: how does a law exempting a Silicon Valley startup from independent accounting actually encourage investment? If American companies have to post real, independently-verified numbers when they go public, doesn’t that give investors all around the world a big reason to put their money here, instead of investing in, say, Mobbed-Up Siberian Aluminum LLC, or Bangalore Sweatshop Inc.?

In other words, how does letting www.investonawhim.com go to market (and stay on the market for five years!) without publishing real numbers actually help the industry attract more financing in general, when the whole point of all of these controls is to make investment a less risky experience for the investor?

One answer trotted out by supporters of the JOBS Act is that it’s just too costly and time-consuming to do these accounting reports for five years. Which essentially means that companies trying to get publicly traded on the stock market, with up to $1 billion in sales, don’t think they’ll be able to hire an accountant to go over their books.

And mind you, this is only one of several provisions in the JOBS Act. Supporters of the bill have been reduced to highlighting the future prospects of litigation as a possible check on fraud arising from the law. This does little for the investor being ripped off at this moment. And it’s true that this looks more like an effort to re-create the tech stock bubble of the late 1990s, I guess because that worked for the Clinton Administration. That overlooks the victims of the dot-com crash.

Taibbi sounds positively penitent about this law. For a few minutes, he had tricked himself into believing, in his words, that “there was a chance Barack Obama was listening to the popular anger against Wall Street that drove the Occupy movement, that decisions like putting a for-real law enforcement guy like New York AG Eric Schneiderman in charge of a mortgage fraud task force meant he was at least willing to pay lip service to public outrage against the banks.” Now this is his assessment:

In the meantime, let’s just say this is a dramatic step taken by Barack Obama. Nobody should have any illusions about where he stands on Wall Street corruption after this thing. Boss Tweed himself couldn’t have done any worse.

Taibbi promises more coverage of the JOBS Act. I’ll be waiting.

UPDATE: I’ve made this point before, but it’s true that the only thing “bipartisanship” means these days is that Democrats have accepted some portion of the Republican agenda. The JOBS Act was a very bipartisan bill, for example.