Matt Taibbi has a strong opinion on Obama’s JOBS Act:

Ostensibly, the law makes it easier for startup companies (particularly tech companies, whose lobbyists were a driving force behind its passage) to attract capital by, among other things, exempting them from independent accounting requirements for up to five years after they first begin selling shares in the stock market.

The law also rolls back rules designed to prevent bank analysts from talking up a stock just to win business, a practice that was so pervasive in the tech-boom years as to be almost industry standard.

This is where I become less convinced. Are there really investors who pay attention to PowerPoint presentations and don’t do independent research before investing? 

Even worse, the JOBS Act, incredibly, will allow executives to give “pre-prospectus” presentations to investors using PowerPoint and other tools in which they will not be held liable for misrepresentations. These firms will still be obligated to submit prospectuses before their IPOs, and they’ll still be held liable for what’s in those. But it’ll be up to the investor to check and make sure that the prospectus matches the “pre-presentation.”

The JOBS Act also loosens a whole range of other reporting requirements, and expands stock investment beyond “accredited investors,” giving official sanction to the internet-based fundraising activity known as “crowdfunding.”

But 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 have their internal processes independently verified before and after 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 http://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?

Get ready for the ostensible answer, because you won’t believe it. Here’s how CNN explained the reasoning behind that exemption:

Having 500 investors or raising $5 million previously forced a company to register with the SEC — a costly endeavor. Filling out stacks of legal forms and undergoing independent accounting audits can cost hundreds of thousands of dollars. The law loosens requirements for most companies by raising several thresholds.

We needed Barack Obama and the congress to compromise the entire U.S. stock market because it’s too expensive for a publicly-listed company with billion-dollar ambitions to hire an accountant?

There are multiple provisions of the bill, but it seems Taibbi is focusing on a sub-set of them. Still worth reading, however.