05/21/2012 (10:16 pm)

End of Extended Benefits May Lower U.S. Jobless Rate: Economy - Bloomberg

Filed under: Finance, News |

The declining U.S. jobless rate may soon get another push downward as Americans lose extended unemployment benefits.

From April 7 through May 12, about 370,000 Americans in 23 states stopped getting the benefits, which provide payments for as long as 99 weeks, according to estimates from the National Employment Law Project. People in the remaining six states and the District of Columbia who still qualify may lose eligibility by September, bringing the program to an end, the report showed.

Some recipients who lose their benefits may decide to accept jobs they view as less than ideal. Others may give up looking for work and drop out of the labor force, eliminating them from the ranks of the jobless. Those outcomes may trim the unemployment rate by 0.1 percentage point to 0.2 point in the next few months, according to economists Dean Maki at Barclays and Michael Feroli at JPMorgan Chase & Co.

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05/07/2012 (12:48 am)

‘Mystery shopper’ job offer may be scam.

Filed under: News, technology |

Who wouldn’t want to get paid to go shopping? That’s partly the allure behind “mystery shopper” scams.

While they aren’t new, these phony “we’ll-pay-you-to-shop”-type ads sprouted like online weeds during the recession as job-hungry Americans hunted for employment.

Law enforcement and some financial institutions say they’re spotting mystery shopping scam attempts — which involve phony checks deposited into a victim’s bank account — several times a week.

“We’ve been seeing it pretty frequently since 2005,” said Vanessa Oddo, finance loss prevention manager for SAFE Federal Credit Union in North Highlands, Calif. She said 200 to 300 suspect checks get brought in to SAFE branches every year.

Similarly, the Northeast California Better Business Bureau office said it gets two or three calls a day from consumers asking about mystery shopper checks they’ve received in the mail.

The losses can be anywhere from a few hundred to several thousand dollars, depending on how much was deposited into the unsuspecting shopper’s bank account.

There are plenty of legitimate mystery shopping companies, which hire individuals to drop in unannounced at retailers, hotels, fast food outlets, restaurants and other businesses to secretly evaluate customer service.

But the fraudulent kind typically operate as fake check scams.

Making contact by mail, email or phone, a fraudster posing as a mystery shopping company “hires” an unsuspecting consumer, who is promised payment after completing a “first assignment totally free credit score.” That assignment often involves sending a phony check to the consumer’s home, with instructions to deposit it in a bank account, keep a small amount as reimbursement, then wire the remainder to Western Union, ostensibly to report on the wire company’s “customer service.”

Ultimately, the phony check bounces, leaving the victim’s bank account dinged for the total amount, as well as wire transfer charges and potential bank fees.

“You see more of these during a recession, when people are searching for jobs or ways to (make) more money. Scammers plan on that,” said Dan Denston, executive director of the North America Mystery Shopping Providers Association, or MSPA, based in Louisville, Ky.

Even legitimate companies that hire mystery shoppers are not immune from scammers. National Shopping Service in Rocklin, Calif., one of at least 16 mystery shopper firms in California, said it, too, has been victimized by scammers who used the company’s name in fake-check scams.

“The majority of people getting these letters and falling for the scams were not even our shoppers. Unfortunately, they got scammed,” said Katy Gravatt, National’s operations manager.

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05/05/2012 (12:28 pm)

Buffett says Berkshire may buy more newspapers

Filed under: Mortgage, News |

Billionaire Warren Buffett says his company’s purchase of his hometown newspaper last year may not be the last one even though newspapers face significant challenges.

A Berkshire Hathaway shareholder questioned whether last year’s purchase of the Omaha World-Herald in Buffett’s hometown was a personal indulgence.

Buffett defends the deal and says he believes Berkshire will profit from its ownership of the Omaha World-Herald company and the Buffalo News. It’s just that the profits won’t be as good as they used to be guaranteed payday loan.

Buffett says newspapers are usually still the primary source of local information, and that’s an advantage in places where community is important.

Buffett acknowledges that newspapers face difficult competition from online news sources and have high costs, but says Berkshire’s newspaper deals should work out OK.

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04/17/2012 (2:48 pm)

US stocks jump after strong profits

Filed under: Finance, Mortgage |

Stocks stormed higher this afternoon after promising signals about the profitability of U.S. companies and a strong debt auction by Spain. The Dow Jones industrial average headed for its biggest gain in a month.

European stocks had their best day in four months after Spain, the latest flashpoint in the European debt crisis, attracted strong investor interest at an auction of two-year debt.

Spain’s borrowing costs fell, as measured by the yields on Spanish bonds being traded in the market. Those yields had risen in recent days closer to levels that might force Spain to seek an international bailout.

“There’s no doubt that gave the market a second wind,” Anthony Chan, chief economist with J.P. Morgan Private Wealth management, said of the debt auction. “The market is reassessing and feeling a little better.”

The Dow Jones industrial average climbed more than 200 points and was up 204 at 13,125 just after 2:30 p.m. EDT. The Dow has had only one 200-point rise this year, a gain of 218 points on March 13.

Doreen Mogavero, a floor broker at the New York Stock Exchange, said people are eager for good news to trade on, and that can lead to sharp reactions in the indexes.

“This earnings season, expectations were low, and it’s going to be easy to beat that,” said Mogavero, the founder and CEO of Mogavero Lee & Co. Inc., a small brokerage of stocks for institutional clients.

They got that good news Tuesday: Coca-Cola said its first-quarter profit was better than Wall Street analysts had forecast. Goldman Sachs and Johnson & Johnson also posted strong results.

After nine straight quarters of growth, earnings for companies in the S&P 500 index were expected to be roughly flat for the first quarter. The slowdown was expected because of global threats from Europe and China and the difficulty of beating double-digit gains in recent quarters.

Markets have been encouraged so far by companies that beat analyst expectations, Chan said. But he warned against judging the quarter based on the small number of companies that have reported at this early stage.

Coke stock leapt 2.6 percent. Traders did not appear as impressed by Goldman Sachs and Johnson & Johnson. J&J was flat, while Goldman fell nearly a percent.

The Standard & Poor’s 500 index added 23 points to 1,392. All 10 of its industry groups were higher, led by information technology stocks.

The Nasdaq composite index soared 63 to 3,051, its best day in three weeks. Apple, the most valuable company in the world, rose 4.4 percent after five straight days of losses that wiped out about $60 billion in market value.

In Spain early Tuesday, the government sold more than €3.2 billion ($4.2 billion) in short-term debt, more than had been expected. The yield on Spain’s 10-year government bond fell to 5.86 percent from 6.10 percent early Monday, a sign of improving confidence in the country’s finances.

The cost of insuring Spanish debt against default pulled back from a record high, another sign that the auction reassured bond investors. The cost of insuring €10 million in Spanish debt for five years had soared to €522,000 per year on Monday. After Tuesday’s auction, it fell to €489,000.

Italy’s benchmark stock index rose 3.7 percent. France’s and Germany’s gained 2.7 percent. The broad STOXX 50 index of European shares rose 2 percent, the most since November.

In the United States, the rally followed a batch of mixed economic news. The number of permits requested by homebuilders for future projects reached a 3½-year high, an indication that the housing market might stop weighing down the economy. But builders broke ground on homes at a slower pace in March.

Factory output fell after four strong months of gains.

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04/14/2012 (4:12 am)

Spain’s banks borrow record amount in March

Filed under: Uncategorized, technology |

Spanish stocks sank and its borrowing costs rose Friday after the government released data showing the country’s banks borrowed a record (EURO)316.3 billion ($415.9 billion) from the European Central Bank in March.

Bank of Spain data showed that ECB lending to the country’s financial institutions almost doubled since February when their reliance was (EURO)169.8 billion ($223.3 billion).

Concern is mounting over Spain’s ability to cut its national debt and lift its struggling economy out of recession when unemployment is nearing 23 percent.

The ECB made some (EURO)1 trillion in emergency three-year loans to banks in two batches in Dec. and Feb., lifelines to Spain’s troubled banks that find it hard to secure short-term financing elsewhere.

The injection spurred lenders to snap up battered government debt, driving Spanish borrowing costs down. However, the effects of the cheap loans across Europe have since dissipated and Spain is taking the brunt of market distrust.

Some of that distrust is misplaced, said analyst Manuel Escudero, who added that much of Spain’s industrial sector appeared to be riding the crisis instead of heading to a major downturn in output.

“I see much of Spain’s industrial sector beginning to internationalize instead of heading toward stagnation, it has slimmed down and is looking reasonably muscular,” said Escudero who heads Deusto University business school in the northern Basque region.

Klaas Knot, a member of the European Central Bank’s governing council, also said he did not see a need for the ECB to engage in buying up Spanish bonds or launch a third program of low-rate loans to European banks to steady markets.

Knot, said last week’s spike in the interest rate of Spanish government bonds was due to “awkward communication” by its government about its plans for budget cuts.

To boost confidence in its finances, the government last month unveiled an austerity budget with (EURO)27 billion ($35.5 billion) in tax hikes and spending cuts this year.

Spain is expected to enter its second recession in three years this quarter, with the country’s central bank forecasting its economy will contract 1.7 percent this year.

The Ibex 35 stock index in Madrid was down 3.6 percent at close of trading Friday and 10-year government yields rose 0.2 percent to 5.93, according to FactSet.

Just five years ago Spain was one of Europe’s most buoyant economies, but a nose-dive started in 2008 when the international financial crisis coincided with the bursting of a real estate bubble that had buoyed the economy for over a decade.

The government ordered banks to strengthen capital levels to cover exposure to bad real estate debt. Investors fear that sustained bank weakness, coupled with rising public debt and high funding costs could force Spain to apply for European aid.

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04/10/2012 (7:52 pm)

Alcoa’s surprise 1Q profit could boost Wall Street

Filed under: Finance, News |

Alcoa may have given a slumping Wall Street just what it needed: a surprise profit.

The largest U.S. aluminum manufacturer said Tuesday that it earned 9 cents share in the first quarter. It surpassed analyst forecasts for a small loss by selling more aluminum to a wide range of customers, including car makers and aircraft manufacturers, and operating its plants more efficiently.

Alcoa is considered a barometer for the economy. It’s also the first of the 30 companies in the Dow Jones industrial average to report results. Its stock rose 5.3 percent in after-hours trading, providing hope that the stock market might halt its longest and deepest slump of the year on Wednesday.

“It looks like they’re going to get the earnings season off on a good note,” said Argus Research analyst Bill Selesky.

Alcoa’s net income of $94 million marks a turnaround from the $191 million loss it reported for the fourth quarter. But it’s 70 percent below net income of $308 million, or 27 cents a share, posted a in the year-earlier quarter.

Revenue rose to $6 billion from $5.95 billion. Analysts predicted revenue of $5.77 billion.

Alcoa said sales rose from the fourth quarter across most of its markets, including automobiles, aerospace and other transportation, to packaging and industrial products. That offset lower realized prices for aluminum and alumina, a material used in processing aluminum.

Investors were anxiously waiting to see Alcoa’s results, scheduled for after the market closed. Fears of a bad earnings season contributed to a recent losing streak that wiped out more than half the first-quarter gain for the Dow, and more than a third for the Standard & Poor’s 500.

On Tuesday, the Dow lost more than 213 points as renewed concerns over Europe’s debt crisis, now focusing on Spain, were added to the earnings jitters.

During the first quarter, analyst expectations for earnings for companies in the Standard & Poor’s 500 index went from an increase of about 3 percent to a decline of 0.1 percent, according to FactSet.

Investors were also watching for Alcoa’s forecast for 2012 global aluminum demand cash advance america. It reaffirmed its expectation for a 7 percent increase. The company expects strong demand for aluminum used in autos, heavy trucks and trailers to remain strong in North America, which accounts for nearly 50 percent of Alcoa’s business.

In the U.S., auto sales rose 13 percent to 3.5 million cars and trucks in the first quarter, and car companies and suppliers were scrambling to meet demand. Many analysts expect the auto industry to have its best sales year since 2007. A trade group for the aluminum industry said that car and trucks made in the U.S. contain an average of 343 pounds of aluminum. That’s about 9 percent of the weight of a vehicle.

The company also expects China’s automotive market to grow as much as 7 percent this year. Demand for aluminum remains weak in Europe, which is struggling to resolve a sovereign debt crisis.

Alcoa’s upbeat earnings could be a good sign for other materials companies. The materials sector _ including metals and mining, diversified chemicals and construction materials _ was expected to show the biggest decline.

“When you look at all the cost cuts (materials) companies did during the recession, they’re a lot leaner now than they were a couple of years ago,” Selesky said. “I think it points to companies doing a bit better than originally expected just based on running a more efficient, leaner company.”

Alcoa cut some smelting and refining operations earlier this year after demand fell late in 2011 as customers became concerned about a slowing global economy. And, faced with high costs for raw materials and energy, Alcoa boosted productivity.

“It’s just a significant effort from all of our businesses and, obviously, the key factor in our earnings improvement,” Chief Financial Officer Chuck McLane told analysts during a conference call.

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04/07/2012 (10:24 pm)

Apple’s ‘iPad’ is the only tablet people know

Filed under: money, technology |

Apple is on the verge of doing what few others have: change the English language.

When you have a boo-boo, you reach for a Band-Aid not a bandage. When you need to blow your nose, you ask for Kleenex not tissue. If you decide to look up something online, you Google instead of search for it. And if you want to buy a tablet computer, there’s a good chance there’s only one name you’ll remember.

“For the vast majority, the idea of a tablet is really captured by the idea of an iPad,’” says Josh Davis, a manager at Abt Electronics in Chicago. “They gave birth to the whole category and brought it to life.”

Companies trip over themselves to make their brands household names. But only a few brands become so engrained in the lexicon that they’re synonymous with the products themselves. This so-called “genericization” can be both good and bad for companies like Apple, which must balance their desire for brand recognition with their disdain for brand deterioration.

It’s one of the biggest contradictions in business. Companies spend millions to create a brand. Then, they spend millions more on marketing that can have the unintended consequence of making those names so popular that they become shorthand for similar products. It’s like if people start calling station wagons Bentleys. It can diminish a brand’s reputation.

“There’s tension between legal departments concerned about `genericide’ and marketing departments concerned about sales,” says Michael Atkins, a Seattle trademark attorney. “Marketing people want the brand name as widespread as possible and trademark lawyers worry … the brand will lose all trademark significance.”

It doesn’t happen often. In fact, it’s estimated that fewer than 5 percent of U.S. brand names become generic. Those that do typically are inventions or products that improve on what’s already on the market. The brand names then become so popular that they eclipse rivals in sales, market share and in the minds’ of consumers. And then they spread through the English language like the common cold in a small office.

“There’s nothing that can be done to prevent it once it starts happening,” says Michael Weiss, professor of linguistics at Cornell University. “There’s no controlling the growth of language.”

FIGHTING BACK

A company’s biggest fear is that their brand name becomes so commonly used to describe a product that a judge rules that it’s too “generic” to be a trademark. That means that any product _ even inferior ones _ can legally use the name. A brand usually is declared legally generic after a company sues another firm for using its name and the case goes to a federal court.

Drug maker Bayer lost trademarks for the names “aspirin” and “heroin” this way in the 1920s. So did B.F. Goodrich, which sued to protect its trademark of “zipper” in the 1920s after the name joined the world of common nouns. Similar cases deemed “escalator” generic in 1950, “thermos” generic in 1963 and “yo-yo” generic in 1965.

It’s difficult to quantify how much revenue a company loses when its brand is deemed generic. But companies worry that it breeds confusion among consumers.

To prevent their names from becoming generic, some companies use marketing to reinforce their trademarks. For instance, after its Band-Aid brand name started becoming commonly used to refer to adhesive bandages, Johnson & Johnsons changed its jingle in ads from “I’m Stuck on Band-Aid” to “I’m Stuck on Band-Aid brand.”

Kleenex uses “Kleenex brand” instead of just “Kleenex” on its packaging and in marketing and places ads to remind people Kleenex is trademarked. And the company contacts some people who use Kleenex generically to refer to tissue in order to correct them.

“We’ve worked very hard to keep `Kleenex’ from going the route of `escalator’ and `aspirin,’” says Vicki Margolis, vice president and chief counsel, intellectual property and global marketing for Kimberly-Clark, which owns Kleenex. “If we lose the trademark, people can use it with sandpaper and call that a Kleenex.”

Xerox is taking a similar route. The company, which introduced the first automatic copier in the U cash advance.S. in 1959, has been on a public crusade for decades to keep its brand from becoming generic. The machine’s success has led people to start using “Xerox” to refer to any copying machine, copies made from one and the act of copying.

“In the mid- to late-1970s, we ran dangerously close to Xerox becoming `genericized,’” says Barbara Basney, vice president of global advertising. “That prompted a lot of proactive action to protect our trademark.”

Xerox has spent millions taking out ads aimed at educating so-called “influencers” like lawyers, journalists and entertainers about its brand name. A 2003 ad said: “When you use `Xerox’ the way you use `aspirin,’ we get a headache.” More recently, a 2007 ad read: “If you use “Xerox” the way you use “zipper,” our trademark could be left wide open.”

While people still use “Xerox” generically _ the Merriam-Webster dictionary lists the word as both a lower-case verb with the definition “to copy on a xerographic copier” and a trademarked noun _ the brand says its campaign has been a success.

Xerox is still popular: It’s ranked the 57th most valuable global brand, worth $6.4 billion, according to brand consultancy Interbrand. And perhaps most importantly, Xerox hasn’t lost its trademark.

TAKING IT IN STRIDE

Sometimes companies embrace when their brands become common nouns.

Perhaps the best example of this is Google, a company created in 1998 when Alta Vista and Yahoo.com were the top online search engines. Google, which created a formula that returned more accurate results than its competitors, became so popular that people began saying “Google” to refer to a Web search, in general. Experts say Google has benefited from its name becoming a part of the lexicon.

“You don’t say `Why don’t I Google it’ and go to Yahoo or Bing,” says Jessica Litman, professor of copyright law at the University of Michigan Law School, referring to other search engines.

Apple also has gotten a boost from its brand names becoming synonymous with products. The iPod, which was the first digital music player when it came out in 2001, is still the name people use for “digital music player” or “MP3 player.” And it appears Apple’s iPad is headed down the same path.

For consumers like Mary Schmidt, 58, the “iPad” is generic for “tablet.” Schmidt, a Baltimore marketing executive, owns an iPad and doesn’t know the names of any other tablets.

“When I think of tablets, I think of an iPad,” she says. “I think it’s going to be the generic name. They were first.”

It remains to be seen if the iPad will maintain its name domination in the tablet market. Apple declined to comment for this article.

For now, Apple Inc. has a majority of the tablet category, which includes Amazon’s Kindle Fire and Samsung Electronics Co.’s Galaxy Tablet. The iPad accounted for about 73 percent of the estimated 63.6 million tablets sold globally last year, according to research firm Gartner.

Apple’s market share is likely to decline as more rivals roll out tablets. But experts say that won’t necessarily diminish iPad’s name recognition.

“Apple is actually pretty good at this,” says Litman, the law school professor. “It’s able to skate pretty close to the generics line while making it very clear the name is a trademark of the Apple version of this general category.”

When the iPad debuted in 2010, some people offered up “Apple Tablet” or the “iTab” as better names. Others even suggested that the name sounded more like a feminine hygiene product than a tablet: “Get ready for Maxi pad jokes and lots of `em!” wrote tech site Gizmo at the time.

Two years later, those complaints are all but forgotten.

“At the end of the day, the product was so successful that even if it wasn’t the `quote unquote’ best name, it made the name synonymous with the category,” says Allen Adamson, managing director at branding firm Landor.

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03/30/2012 (10:32 am)

Treasury sells Central Pacific Financial shares

Filed under: News, USA |

The U.S. Treasury Department said on Friday that it is selling the remaining 2,770,117 common shares it holds in Central Pacific Financial Corp (CPF.N: Quote, Profile, Research, Stock Buzz) at $13.15 a share for expected proceeds of $36 million.

Treasury put $135 million into the company as part of the Troubled Asset Relief Program during the financial crisis and, after the latest sale, will have received proceeds back of $71 payday loan lenders.9 million.

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03/29/2012 (12:52 am)

UK government feels the heat on Cornish pasty tax

Filed under: UK, economics |

The British government’s intention to tax the humble Cornish pasty, a cheap pastry savory snack much beloved by workers and students, has opened a new front in the country’s never-ending class war.

In his U.K. budget last week, Finance Minister George Osborne announced he would close a loophole which allowed some fresh-baked takeaway items _ including pies, sausage rolls and pasties (PASS-tees) _ to escape a 20 percent sales tax.

The move, however, has caused a media storm, with tabloid headlines portraying the new tax as an attack by the Conservative-led government on working class life.

This Tuesday, Osborne faced questions from a parliamentary committee on aspects of his budget _ which included such macroeconomic measures as a cut in the top rate of income tax, a lowering in the personal tax allowance for retired people and reduction in corporation tax. But is was the levy on the lowly pasty _ a mixture of meat and vegetables encased in pastry that was first baked for tin miners of 17th century southwest England _ that generated all the headlines.

“I can’t remember the last time I bought a pasty in Greggs,” Osborne told a parliamentary committee on Tuesday, referring to a low-price snack shop chain.

“That kind of sums it up,” responded Labour Party lawmaker John Mann, a former union official.

The storm rolled into Wednesday when, at a press conference to discuss London’s readiness for the Olympics with International Olympic Committee chairman Jacques Rogge, Prime Minister David Cameron was compelled to pledge allegiance to the pasty.

“I am a pasty eater myself,” he declared to reporters.

Cameron said he last ate one in Leeds, though not at a Greggs. “I have a feeling I opted for the large one, and very good it was, too,” the Oxford-educated prime minister said.

Greggs bakeries, a purveyor of fast-food, including 140 million sausage rolls per year, saw its shares slump 5.5 percent last week on news of the new tax.

Greggs chief executive Ken McMeikan met Treasury officials on Tuesday to plead his case and afterward said the government had “lost touch” on the issue.

“For ordinary, hardworking families, putting 20 percent on to a product that is freshly baked actually is going to make a severe dent in their pockets,” he said in a BBC interview.

The opposition Labour Party has often charged Cameron’s government with being “out of touch” with the average Briton, a message party leader Ed Miliband repeated while standing outside a Greggs shop.

Even a Conservative legislator, Nadine Dorries, has said Cameron and Osborne “don’t know what it’s like to go to the supermarket and have to put things back on the shelves because they can’t afford it for their children’s lunchboxes. What’s worse, they don’t care either.”

The National Federation of Fish Fryers jumped into the debate, calling the present tax provision “an utter mess” and wondering why their hot food taxed when the bakery next door was exempt.

The government expects the levy on sausage rolls and pasties, effective Oct. 1, to raise 105 million pounds ($167 million) in the first full year. A Treasury consultation paper drily noted that the change would only hit “individuals and households that purchase products that are affected by this change.”

Under current law, shops like Greggs’ have to charge sales tax _ called Value Added Tax _ on hot takeaways including soup and hot sandwiches. Pasties and sausage rolls are exempt because after baking they are left to cool in unheated cases.

Extending the tax to rolls and pasties is no simple change. According to the finance ministry, the tax now applies to food “heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature and which is above that temperature” when purchased.

The proposed change would tax any food hotter than the ambient temperature, but could pose difficult issues: do you check the temperature of the inside of the sausage roll or pasty, or the cooler crust? Might the buyer ask to have it cooled to get it tax-free?

Osborne denied that the government would be poking a thermometer into every pie and roll. Tax officials and bakers would simply agree on the portion of total sales which would be affected, he said.

“There are perfectly sensible ways of working this out,” Osborne said.

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03/25/2012 (6:56 pm)

JOBS bill creates an investor-beware world

Filed under: Loans, technology |

Less than two years after tightening some financial regulations in the Dodd-Frank Act, Congress appears ready to loosen others in the name of job creation.

The Jumpstart Our Business Startups bill – known as JOBS, of course – would reduce the red tape involved in making an initial public stock offering, and make it legal for businesses to solicit investors over social media, a process known as crowdfunding.

The bill also would roll back some longstanding investor protections. The Securities and Exchange Commission, AARP, the AFL-CIO and the Consumer Federation of America have all expressed concerns that the bill will lead to a surge in investment fraud.

The North American Securities Administrators Association, a group of state regulators, calls the bill “an investor protection disaster waiting to happen.” The group’s president, Nebraska official Jack Herstein, said in a statement that the JOBS bill creates “new jobs for promoters of Internet investment scams.”

Tossing such warnings aside, Senate passed JOBS Thursday on a 73-26 vote, following an even more lopsided approval in the House. (The bills differ slightly, so another House vote is necessary. President Barack Obama has said he’ll sign the legislation.)

The hope is that, freed of red tape, entrepreneurs will find it much easier to raise money and hire people. It’s tough to be against a jobs bill in an election year.

What happens, though, if the critics are right and there’s an increase in fraud? If investors lose faith in the capital markets, companies will find it harder, not easier, to raise money.

“Investors won’t return to the IPO market if they don’t believe they can trust it,” SEC Commissioner Luis Aguilar says in a statement on the agency’s website. He also calls the legislation “a boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters.”

The bill would create a new class of “emerging growth companies” that wouldn’t have to follow certain rules. They’d get a five-year reprieve, for example, from the need to have an audit of their internal controls.

The most eagerly anticipated part of the bill involves crowdfunding, a concept that sites like Kickstarter have used to raise money for art projects and other nonprofit causes.

Advocates say crowdfunding could be a big new source of capital for new businesses.

“The majority of Americans have been excluded from the opportunity to participate in the startup community,” says Clifford Holekamp, a lecturer in entrepreneurship at Washington University’s Olin School of Business. “It really democratizes the process of equity investing. This is a cultural shift that’s really exciting.”

Those novice mini-angel investors will be operating, however, with only a thin layer of protection. The Senate version of JOBS requires crowdfunding platforms to register with the SEC, but no regulator would vet the offerings themselves.

They’d be exempt from states’ registration requirements, and that’s what bothers Robin Carnahan, the Missouri Secretary of State.

“I’m a fan of crowdfunding,” she said. “It’s important to give small businesses access to new funding opportunities, but we need to do it in a measured and responsible way.”

Her office will watch crowdfunding deals for signs of fraud, she says, but unfortunately, it’s hard to get your money back from a scam artist. A wiser course would have been to combine this new form of investing with the upfront protection that people have come to expect in America’s financial markets.

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