May 4, 2010

Update on Senator Dodd’s Proposed Bill

We recently published a blog post which addressed Democratic Senator Chris Dodd’s proposed financial reform bill. We discussed some aspects of this bill and the possible negative effects it could have on angel investing in the United States, including more than doubling the net worth threshold for accredited angel investors to $2 million and requiring lengthy filing processes with the SEC.

The Senate began debating Dodd’s proposed legislation last week. According to an article in the Denver Business Journal, Dodd will personally offer amendments “that will allay most concerns” felt by angel investors and entrepreneurs alike. The first amendment keeps the investor worth threshold at $1 million, but will now exclude the value of the investors’ home. The second would eliminate the need for angel investments to be subject to different state regulations (which would make angel investments time-consuming and expensive for entrepreneurs).

US Capitol

Much of the Senate’s discussion thus far has been centered around preventing future economic crises as well as tax-payer-funded government bailouts. According to an article in Bloomberg Businessweek, “staff for Dodd . . . and Alabama Senator Richard Shelby, the banking panel’s top Republican, are close to completing a joint amendment to address Republicans’ concerns that Dodd’s bill doesn’t do enough to prevent future bailouts, according to a Senate aide familiar with negotiations. Part of the compromise will be to remove a provision in Dodd’s measure that would have created a $50 billion industry-supported fund to pay for unwinding a failing systemically important financial firm”

The same article addresses other amendments being proposed during this process:

  • Senator Jim Webb (Virginia, Democrat) offered the amendment to impose a one-time, 50 percent tax on bonuses of more than $400,000 paid to executives of financial institutions that got at least $5 billion from the $700 billion Troubled Asset Relief Program Congress approved in 2008. It would apply to income generated for work in 2009 and paid in 2010.
  • Senator Kay Bailey Hutchison (Texas, Republican) wants to preserve the Federal Reserve’s powers to oversee small banks.  This would eliminate a provision in Dodd’s bill that shrinks the central bank’s jurisdiction to the 36 banks with more than $50 billion in assets (including Goldman Sachs and Morgan Stanley).
  • Senator John McCain (Arizona, Republican) wants to eventually dissolve government-backed mortgage-finance companies Freddie Mac and Fannie Mae.
  • Senator Ben Cardin (Maryland, Democrat) submitted an amendment to provide protections for whistle blowers who work for Moody’s Investors Service, Standard & Poor’s and other credit-rating companies.


The bill is expected to be completed by the end of the week, and we’ll keep you informed of any major changes that happen between now and then.  For now it looks like, for the most part, the voice of the investor and entrepreneurship communities have been heard and taken into consideration.

  • Jacksonjones1780

    The Senate began debating the Dodd bill last week. According to an article published in the Denver Business Journal, Dodd personally propose amendments "to appease most concern" felt by angel investors and entrepreneurs. The First Amendment keeps the threshold for investors worth $ 1 million, but now exclude the value of the house of investors. The second would eliminate the need for angel investments subject to various state regulations (which would make angel investing time and money for employers.)Royal Bank Online Banking

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