Thomson Reuters asked The Soho Loft to speak on the JOBS Act and Dodd-Frank Act at their Buyouts Conference in Dallas, Texas recently. We felt Dodd Frank’s financial overhaul created two years ago is displaced as today we are focused on the potential for job creation the JOBS Act brought. SMEs represent over 99% of US employer firms and speakers felt Dodd-Frank is poorly written and implemented. It seemed to be a consensus that there were too many chefs in the kitchen when implementing the Dodd Frank Act. In addition, regulating big banks must take the small players into account since those companies stand for the job creation.”
One of these smaller players is the Small Business Investor Alliance (SBIA) in Washington DC represents 200 members with a few dozen family offices and services providers and 150 or so Small Business Investment Companies (SBIC) that sit on $25 to $250 million in assets under management. These are the fund managers that lend to the true small businesses of America. So why are we discussing this?
Right now discussions have a Dec. 31, 2012 deadline under the Fiscal Cliff, see article following this which is very relevant to the SBIA. While New Yorkers are licking their wounds from Hurricane Sandy, Obama is considering whether to treat capital gains as ordinary income which would take the 15% capital gain tax and more than double it to a possible 36% (Bush Era tax) or 39.6% (Clinton Era tax). The SBIC fund managers manage $19 billion in the US and they will be hit the hardest.
So, we may need a quantitative analysis so we don’t squeeze them out as their margins are obviously more challenged than the private equity behemoths of Blackrock, KKR and Carlyle. Fine, maybe we should not cry for fund managers but their SME influence cannot be ignored. The SBIC success is being emulated by the European Union as discussed at the US delegate attended the Transatlantic Economic Council in Brussels and Rome last July. SBIA certainly does get the attention of the hill on this topic. Remember, a small $25 million fund in Missouri has a Senator and Congressman equally as influential as one from New York dealing with a $10 billion dollar private equity fund. The SBIC is a US success story and the association of SBIA has an influential voice. The Private Equity industry, with speakers from Carlyle and KKR, was well represented at Thomson Reuters event in Dallas and the JOBS Act got more attention than expected.