FacebookTwitterGoogle+RedditEmail

Learning From Facebook

by ROBERT WEISSMAN

Whether or not you’re an investor, it’s important to grasp the significance of what’s happened with the Facebook initial public offering (IPO).

In the few days since its IPO, Facebook’s stock price has fallen almost 20 percent amidst news that underwriters led by Morgan Stanley and perhaps Facebook itself shared negative assessments of the company only with big, institutional investors — not with the broader investing public.

It’s going to take some time to suss out exactly what happened with the Facebook IPO, but step back and consider the broader implications. They are staggering.

The most hyped IPO in history has turned into a debacle marred by insider dealing. It’s no exaggeration to say the whole world was watching — and still the decks were stacked against average investors.

This is remarkable commentary on the untrustworthiness of Wall Street. If anyone had any doubts, it shows the utter folly in relying on Wall Street to police itself.

What’s that you say? Oh yes, that’s right, Congress did just pass and President Obama eagerly signed legislation — the misnamed JOBS Act — to reduce regulatory oversight of Wall Street and the launch of IPOs. It aims to make it easier for new companies to launch IPOs without providing detailed information about their operations to investors. Whoops.

At the time the bill was under consideration, critics (including Public Citizen) suggested the JOBS Act was basically pro-fraud legislation. “The legislation is premised on the dangerous and discredited notion that the way to create jobs is to weaken regulatory protections,” wrote a public interest coalition headed by the Consumer Federation of America and Americans for Financial Reform. The legislation would “roll back regulations that are essential to protecting investors from fraud and abuse, promoting the transparency on which well-functioning markets depend, and ensuring the fair and efficient allocation of capital.”

The JOBS Act was an assault on common sense at the time it was passed — has the Obama administration and Congress really forgotten that the Wall Street crash that threw us into the Great Recession was caused in significant part by regulatory failures? — but it looks even worse this week than it did at time of passage.

It’s not too much to take from the Facebook debacle — along with other smoldering scandals, like the JPMorgan Chase multi-billion dollar derivatives loss and the accounting mess at Groupon — broader lessons than just that the JOBS Act was a horrendous mistake.

First, we need tougher not weaker controls on Wall Street activity. That means, at minimum, that we need aggressive and rapid implementation of the Dodd-Frank Wall Street reform legislation, including the Volcker Rule that aims to limit the speculative betting of big banks.

Second, and more generally, Big Business cannot be trusted to police itself. We need strong health, safety, environmental, financial and other regulatory protections, with well-resourced regulatory cops on the beat and citizens empowered to enforce the rules that regulators fail to apply.

These are simple lessons that you’d expect a child to understand. In Washington, though, these lessons are willfully forgotten and require constant reaffirmation. Well, the Facebook episode has done that once again.

Robert Weissman is president of Public Citizen.

More articles by:

ROBERT WEISSMAN is president of Public Citizen.

February 19, 2018
Rob Urie
Mueller, Russia and Oil Politics
Richard Moser
Mueller the Politician
Robert Hunziker
There Is No Time Left
Nino Pagliccia
Venezuela Decides to Hold Presidential Elections, the Opposition Chooses to Boycott Democracy
Daniel Warner
Parkland Florida: Revisiting Michael Fields
Sheldon Richman
‘Peace Through Strength’ is a Racket
Wilfred Burchett
Vietnam Will Win: Taking on the Pentagon
Patrick Cockburn
People Care More About the OXFAM Scandal Than the Cholera Epidemic
Ted Rall
On Gun Violence and Control, a Political Gordian Knot
Binoy Kampmark
Making Mugs of Voters: Mueller’s Russia Indictments
Dave Lindorff
Mass Killers Abetted by Nutjobs
Myles Hoenig
A Response to David Axelrod
Colin Todhunter
The Royal Society and the GMO-Agrochemical Sector
Cesar Chelala
A Student’s Message to Politicians about the Florida Massacre
Weekend Edition
February 16, 2018
Friday - Sunday
Jeffrey St. Clair
American Carnage
Paul Street
Michael Wolff, Class Rule, and the Madness of King Don
Andrew Levine
Had Hillary Won: What Now?
David Rosen
Donald Trump’s Pathetic Sex Life
Susan Roberts
Are Modern Cities Sustainable?
Joyce Nelson
Canada vs. Venezuela: Have the Koch Brothers Captured Canada’s Left?
Geoff Dutton
America Loves Islamic Terrorists (Abroad): ISIS as Proxy US Mercenaries
Mike Whitney
The Obnoxious Pence Shows Why Korea Must End US Occupation
Joseph Natoli
In the Post-Truth Classroom
John Eskow
One More Slaughter, One More Piece of Evidence: Racism is a Terminal Mental Disease
John W. Whitehead
War Spending Will Bankrupt America
Robert Fantina
Guns, Violence and the United States
Dave Lindorff
Trump’s Latest Insulting Proposal: Converting SNAP into a Canned Goods Distribution Program
Robert Hunziker
Global Warming Zaps Oxygen
John Laforge
$1.74 Trillion for H-bomb Profiteers and “Fake” Cleanups
CJ Hopkins
The War on Dissent: the Specter of Divisiveness
Peter A. Coclanis
Chipotle Bell
Anders Sandström – Joona-Hermanni Mäkinen
Ways Forward for the Left
Wilfred Burchett
Vietnam Will Win: Winning Hearts and Minds
Tommy Raskin
Syrian Quicksand
Martha Rosenberg
Big Pharma Still Tries to Push Dangerous Drug Class
Jill Richardson
The Attorney General Thinks Aspirin Helps Severe Pain – He’s Wrong
Mike Miller
Herb March: a Legend Deserved
Ann Garrison
If the Democrats Were Decent
Renee Parsons
The Times, They are a-Changing
Howard Gregory
The Democrats Must Campaign to End Trickle-Down Economics
Sean Keller
Agriculture and Autonomy in the Middle East
Ron Jacobs
Re-Visiting Gonzo
Eileen Appelbaum
Rapid Job Growth, More Education Fail to Translate into Higher Wages for Health Care Workers
Ralph Nader
Shernoff, Bidart, and Echeverria—Wide-Ranging Lawyers for the People
Chris Zinda
The Meaning of Virginia Park
FacebookTwitterGoogle+RedditEmail