James Taranto regularly skewers reporters whose ideological blinkers render them incapable of distinguishing between causes and effects. He calls it the Butterfield Fallacy in honor of New York Times reporter Fox Butterfield, who couldn’t understand why incarceration rates were rising when crime rates were going down.
The Times must be full of Butterfields. Take Steven Rattner, who writes online about economics. His column on Sunday—supposedly a takedown of the JOBS Act that the president signed into law in April—reflects a working life spent in finance, journalism, and government but not founding companies that employ people:
Its enticing acronym notwithstanding, the JOBS Act has little to do with employment; it’s a hodgepodge of provisions that together constitute the greatest loosening of securities regulation in modern history.
It will no doubt come as news to entrepreneurs everywhere that tight regulations don’t make jobs harder for them to create.
Most troublesome is the legalization of “crowd funding,” the ability of start-up companies to raise capital from small investors on the Internet.
What’s wrong with crowd funding? Answer comes a few grafs later: crowds are made up of ordinary people, not experts.
Picking winners among the many young companies seeking money is a tough business, even for the most sophisticated investors. Indeed, most professionally run venture funds lose money. For individuals, it’s pure folly.
It’s true there are potential issues with allowing unfettered boiler-room sales of securities to the unsuspecting; there’s plenty of opportunity for fraud, deceit, and ruination of the innocent. But we have a form of that anyway with licensed brokers cold calling from companies like Morgan Stanley, Rattner’s old employer, as well as through crowd-sourcing sites like Kickstarter.
One gets the feeling that what Rattner objects to most is not so much the lack of consumer protection as the lessening of “expert” influence over the masses. In his world, hicks never come in from the rain till experts tell them to. Only “sophisticated investors” can pick winners and losers—you know, like the professional geniuses at the Department of Energy who invested half a billion of our dollars in Solyndra.
Or the experts who decided to bail out the auto industry with billions of our dollars. How’s that worked out?
The Obama administration said in a report to Congress that its projected auto losses fell to $20.3 billion, from its prior quarterly estimate of $24.3 billion.The Treasury in 2009 initially forecast it would lose $44 billion on its bailout of General Motors Co., Chrysler Group LLC and their finance arms.
Then there were all those independent dealerships that the bailout didn’t bet on and were forced to close, probably needlessly. You can thank the sophisticated investors for that, too.
One of them, in fact, was Steven Rattner himself. Here’s his Times bio:
Steven Rattner, a long-time Wall Street financier, led the restructuring of the auto industry in 2009 as counselor to the Treasury secretary under the Obama administration.
If that’s the first thing you choose to say about yourself, your warnings about investment vehicles deserve to fall on deaf ears.