How the Biden-Harris administration threatens your retirement savings

Despite the subsequent rally, the stock market's plunge in early August and subsequent volatility highlights the damage that the Biden-Harris administration's policies are inflicting on the US market, and the have dire consequences for their retirement savings. To protect average Americans' retirement savings, we need to reverse these destructive policies as soon as possible.

Under the Biden-Harris administration, the Securities and Exchange Commission (SEC) has continued Obama-era policies, steadily reducing the number of publicly traded companies in the United States and reducing the average American's investments, including 401(k) investments. It severely limits your options. or an IRA retirement account.

In 2021, when most of the Trump administration's policies were still in place, there were 1,035 initial public offerings (IPOs) in the U.S., including mergers between public special purpose acquisition vehicles (SPACs) and private companies. It also included trading. Once the Biden-Harris SEC implemented its policies, the number of initial public offerings in the U.S. plummeted to 181 in 2022 and 154 last year.

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The Biden-Harris SEC policy aggressively discourages companies from going public, building on Obama-era policies that have led to a long-term decline in the number of U.S. companies listed since the 1990s.

In 2021, President Joe Biden suddenly insisted that SPACs are investment companies that should be regulated like mutual funds, despite decades of recognizing them as public companies. A new leader was appointed. The threat of such regulation, made without legislation or a rulemaking process that would allow for public comment, cooled the SPAC boom that had reversed the decline of public companies.

The Obama-era Dodd-Frank Act has drawn political attention to issues such as the ratio of CEO pay to employee pay for publicly traded companies, the use of “conflict minerals” and participation in “extractive resource” industries. Mandatory disclosure of various information on topics. Being a public company is unpleasant and expensive.

Requiring disclosures about matters not normally related to companies benefiting shareholders could create a new source of income for trial lawyers who bring cases against publicly traded companies for erroneous disclosures. These lawsuits are often settled to avoid litigation costs, increasing our costs as a public company.

The market crashes on August 5th and September 3rd demonstrated the devastating impact of the decline in the number of listed companies. Even as the number of publicly traded companies has declined from a high of nearly 8,000 in 1996 to about 4,000, 401(k) and IRA accounts continue to be deducted from workers' paychecks every other week. Generally, you can only invest in liquid securities such as publicly traded stocks.

It's no surprise that the top 10 stocks in the S&P 500 index account for nearly one-third of the index's market value. Retirement savings becoming increasingly concentrated in a smaller number of stocks means market crashes like those of August 5th and September 3rd can be difficult for older investors who are seeing their savings dwindle. This means that people are particularly anxious. An increase in the number of publicly traded companies would allow retirement investors to spread their investments across more companies and spread their risk.

Perhaps the most dramatic illustration of this problem is the Wilshire 5000, an index that tracks the performance of the entire U.S. stock market. It was founded in 1974 with approximately 5,000 shares, as its name suggests, but that number is currently below 3,500.

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recent report The Wall Street Journal attributed the decline to two decades of cheap capital being used to finance mergers between public companies. While mergers are contributing to the decline, the real culprit is a reduced supply of new companies entering the market through IPOs.

Why are IPOs becoming an endangered species? Entrepreneurs are reluctant to go public in the United States because going public is unattractive and expensive. Not content with the rapid decline of public companies, the SEC continues to propose new disclosure requirements, including recent proposals to require disclosure of environmental social and governance issues.

The Obama-era Dodd-Frank Act has drawn political attention to issues such as the ratio of CEO pay to employee pay for publicly traded companies, the use of “conflict minerals” and participation in “extractive resource” industries. Mandatory disclosure of various information on topics. Being a public company is unpleasant and expensive.

The Sarbanes-Oxley Act created the Public Company Accounting Oversight Board and continues to impose an ever-increasing number of accounting requirements. Publicly traded companies spend millions on lawyers and accountants to comply with disclosure and accounting rules, and failure to do so exposes them to strike lawsuits and hostile hearings in Congress.

Additionally, the growth of private equity funds (driven by investments from pension plans for state and local government employees) has made pursuing an IPO a less attractive option for promising private companies that wish to remain private. Rather, such funds offer an easy path to selling shares.

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As with many other issues, common sense policies are readily available to restore the vitality of the U.S. public stock market. The SEC should remove the regulatory uncertainty surrounding SPACs, including reforming SPACs as necessary, and reduce the disclosure and accounting burden for all public companies to reduce the high costs of being a public company. .

These measures will encourage successful private companies to access the public markets for funding to build their businesses and give ordinary Americans the opportunity to invest in those innovative companies. It will be.

Norm Champ is a former director of the U.S. Securities and Exchange Commission's Division of Investment Management and the author of the following books: “Going Public: My Adventures Inside the SEC and How to Prevent the Next Catastrophic Crisis.” (McGraw-Hill, 2017).