Jobs Act: White House, Democrats at odds over Obama-backed pro-business bill

White House allies are in an uproar over pro-business legislation embraced by President Obama, exposing a new rift in his relations with Democratic lawmakers and supporters amid his efforts since the fall to mend those ties.

The bill is designed to make it easier for growing companies to raise money and reduce the cost of complying with securities laws. But critics warn it would allow firms to avoid disclosing crucial financial information and elude government oversight, opening the door to fraud and investor abuse. The measure is set to pass Congress on Tuesday.

Gallery

 These leaders are key advisers to President Obama on economic issues.

The JOBS Act’s good and bad sides

Olga Khazan

The JOBS Act addresses many of the problems that investors and start-ups alike have for years said plague the venture market. 

To rally skeptical Democrats, including some who were thinking of trying to keep the bill from coming up for a vote, Senate Majority Leader Harry M. Reid (D-Nev.) last week made a last-minute, behind-the-scenes appeal to let the bill proceed, according to congressional aides. In the Mansfield Room off the Senate floor, Reid warned his Democratic colleagues against obstructing a measure backed by the president and standing in the way of a bipartisan effort to create jobs.

The Senate voted on the legislation, although half of the chamber’s Democrats voted against passage. Congressional aides said the White House’s enthusiastic support for the bill left some Democratic senators feeling boxed in.

Republicans call the measure a “jobs bill.” Democrats call it an “IPO” bill, referring to the initial public offerings of stock made by companies to raise money from investors. The White House calls it a “startup bill,” and its swift progress through Congress reflects Obama’s desire to show he has strong business credentials and favors a sensible scaling back of regulations. The White House has also sought to demonstrate bipartisanship by supporting the measure — officially known as the Jumpstart Our Business Startups Act, or Jobs Act.

“Helping startups and small businesses succeed and create jobs is fundamental to having an economy built to last,” the White House said in a statement of support for the legislation this month.

Since the fall, the White House has worked hard to reconcile with liberal groups, adopting tougher rhetoric toward Republicans and advancing a series of policy proposals embraced by allies. But when liberals revolted over this recent legislation, the White House responded with what critics complain was only a token acknowledgment of their concerns. The bill has raised objections from prominent union, consumer and regulatory groups.

Richard Trumka, AFL-CIO president, said last week that the bill “will do nothing to create good jobs and stabilize the U.S. economy. Instead, it will deregulate Wall Street — voiding investor protections put in place after Enron and the 2008 financial crisis.”

Sen. Richard J. Durbin (Ill.), the second-highest-ranking Democrat in the Senate, said last week that the bill “would exempt firms from safeguards that we adopted in this country after Enron” — the energy company that imploded in 2001 after a massive accounting fraud, giving rise to far-reaching regulations overseeing disclosures by public companies.