Thursday, January 06, 2011
The Dodd-Frank law, which was supposed to regulate financial institutions, contains all sorts of extraneous job-killing nonsense. Today, for example, the Securities and Exchange Commission has released proposed new regulations under the law to require public companies to investigate whether certain raw materials have come from the Congo. From Sullivan & Cromwell's executive summary (via email routed to me in my day job):
The SEC has proposed rules under the Securities Exchange Act that would require disclosure of certain information related to “conflict minerals,” as required by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. “Conflict minerals” are defined to include columbite-tantalite, also known as coltan (the precursor to tantalum); cassiterite (a precursor to tin); gold; wolframite (the precursor to tungsten) and their derivatives. These minerals and their derivatives are found in a wide array of products, including computers, mobile telephones and other consumer electronics; jewelry; and various electronic, electrical, communications and aerospace applications. The SEC has indicated that, in light of the many uses of these minerals and their derivatives, it expects the proposed rules to apply to many issuers.
Under the proposed rules, if any conflict minerals are necessary to the functionality or production of a product that an issuer manufactures, or contracts to manufacture, that issuer would be required to conduct a reasonable country of origin inquiry to determine whether those conflict minerals originated in the Democratic Republic of the Congo or an adjoining country. If the issuer determines, based on that inquiry, that any of its conflict minerals originated in one of those countries, or is unable to determine that any of its conflict minerals did not originate in one of those countries, the issuer would be required, among other things, to disclose in its annual report filed with the SEC its conclusion (or inability to reach a conclusion) regarding the origin of the conflict minerals. In these circumstances, or if the conflict minerals came from recycled or scrap sources, the issuer would furnish as an exhibit to its annual report filed with the SEC a Conflict Minerals Report, which would include:
• a description of the issuer’s due diligence investigation on the source and chain of custody, or recycled or scrap status, of its conflict minerals;
• certain information about the issuer’s products that are not, or that the issuer cannot determine are not, “DRC conflict free” (recycled or scrap conflict minerals would be deemed to be “DRC conflict free”); and
• an independent private sector audit of the Conflict Minerals Report.
So, if you are an American manufacturer and you use any of those materials which might have come to you through a multi-layer supply chain, you now have to investigate the origin of those raw materials back through your vendors, incorporate disclosure about the findings in your SEC filings, and hire a third party to conduct an audit of your findings. Got it?
Never mind that this regulation has nothing to do with "reforming" the regulation of financial institutions. Never mind that it is totally irrational to make them apply to a company just because its shares are publicly traded. This is dead weight expense that burdens American manufacturers, precisely the businesses that we need to start hiring again. I suspect it will cost some manufacturers hundreds of thousands to comply, incremental expense that will by definition cannibalize employment.
The economic damage done to American business by the Democrats in the last two years is vast, and it blunts our fiscal and monetary policy which is purchased at great cost to our posterity. Yes, we are debasing our currency and destroying the standard of living of our descendants to stimulate the economy and simultaneously exhausting business with crazy new regulations that do nothing other than scratch some random liberal social agenda. It is an absolute outrage, and every unemployed American should be furious.
Even worse, many of these materials have multiple sources which are all mixed together at the smelter. So that cell phone you have in your pocket may contain gold from two dozen different countries.
It's the concept of "Original Sin" applied to base earths.
The Only Morality----Economics. We are to be outraged over economics---but let's celebrate the ending of DADT! See it is alright to allow daddy to marry a man but god forbid if regulations hamper good economics! I'm outraged! I get right on that as soon as that Male Sergeant stops kissing that Male Lance Corporeal!
What America stands for---as long as you don't touch my economics---everything else is free range baby.