Hey Geithner, Get Your Grubby Hands Off The Venture Capital Industry

http://www.techcrunch.com/2009/04/09/hey-geithner-get-your-grubby-hands-off-the-venture-capital-industry/

by vaksel • 17 years ago

14 5 17 years ago

bilbo0s• 17 years ago

OK, I'll bite.

I should preface this by saying that I am looking for more information on why watching the sources of VC money is bad. So if there is a finance guy out here please let me know where my thinking is flawed.

Now treasury wants to watch the sources of certain asset classes so that, say, asset class A can't be a proxy for high risk asset class B. Now I assume, (and we all know what assuming does), this is to prevent the finance by proxy of high risk asset class B through low risk leverage via asset class A.

That seems, to me, to be imminently sensible given the education we've all received through the present crisis. Perhaps I have missed something. Any help from finance guys would be greatly appreciated.

j2d2• 17 years ago

The nature of VC is quite different from the nature of the forms of investing that caused the crisis. One of the culprits behind getting the crisis to such a massive scale is leverage. VC firms rarely leverage their funds due to the highly risky nature. Perhaps PG or someone else could elaborate on the behavior of VC or Angel investors because it's crucial to understanding this distinction.

Now contrast the nature of VC vs. what people are thinking about when they put money away for retirement. They're not trying to help get a company off the ground. They're usually just trying to beat inflation and, if possible, get a little more. These people lost money in a huge way. The people responsible lost money in such a huge way that the world is now struggling. The whole world. It is highly unlikely a VC could pull something like this off via their investments. Even the dotcom boom demonstrated how investing ones own money and taking on the risks involved will keep a crisis contained primarily (not exclusively) to those involved.

Let's also not forget the SEC has not proven it's abilities to catch bad behavior...

Edit: And, simply on principle, I back the notion that the Gov should generally stay out of my business.

jacoblyles• 17 years ago

>Let's also not forget the SEC has not proven it's abilities to catch bad behavior...

Given that it was warned about the Madoff fraud for 9 years and did nothing, I would say it proved the opposite. It's interesting to see Gheitner use the Madoff case as justification to expand the SEC's authority.

http://www.usatoday.com/money/markets/2009-02-12-markopolos-...

condor• 17 years ago

If I had to guess I'd say vc oversight is part of a larger 'lets watch all the money in the system' initiative. Seeing as how the govt has pledged upwards of $12 trillion to bridge parts of the us financial system, I can understand why the government would want to keep an eye on everything to limit the chances of something in the shadows blowing up and requiring further govt bridging. Will it work, who knows ... personally, I don't agree with it, nor do I agree with any of the bailouts: banking, auto otherwise.

Dilpil• 17 years ago

It seems that VC doesn't really object to the actual regulation as much as the implication that VC is at all like hedge funds, private equity, or investment banking.

Hey Geithner, Get Your Grubby Hands Off The Venture Capital Industry

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