The danger of regulating venture capitalist firms

OPINION: "Is Silicon Valley a Systemic Risk?" by James Freeman, Wall Street Journal, 9 April 2009.

A warning against Treasury deciding to treat large venture capital funds as being the equivalent of hedge funds--namely, the chill effect on innovation and start-ups.

Sarbannes-Oxley was a real mess of regulation that burdened U.S. companies unduly. Extending that sort of stultifying control over Silicon Valley will come back to haunt us.

Gist: These are not overleveraged plays that generate systemic risk.

Comments

[joe Michels]

This regulation is not about "risk" it's about control. Government control over financial matters, In this case to make sure that money is invested in business that the "government" believe is a good thing. As opposed to what people want to use their own money to invest in.

This will distort capital investment and when distortions are caused in the market, bubbles are created.

This is a dangerous path for free enterprise. I find it very hard to accept that very intelligent people can't see this for what it is. A command economy in the making.

[viper]

Maybe start-up venture capital in technology or new markets is contributed in cash, but venture capital investment in more mundane food and beverage businesses is laden with debt at expensive rates. The pressure on selling out is not healthy for the sustainability of the company. Some regulations are necessary.