The big nasty untold (by the media) secret of the economy at the moment is that only government is hiring.  And if that stays the case, the country will never be prosperous; prosperity granted to by at the someone else’s sufference (and someone else’s expense) isn’t “prosperity”, it’s being a pet.

If America’s economy is to recover, it’ll be when American business recovers.  Not the “too big to fail” businesses, mind you, because if a business is “too big to fail”, it’s too big to really do anything new, innovative or transformative.  (Indeed, the concept of “too big to fail” needs to be taken out and smothered).

No, America will be back when entrepreneurs can invent the better mousetrap.

And a bill by Senator Dodd seems to try to ensure that that doesn’t happen, by making it very difficult for “angel investors” – investors operating largely outside the formal banking system – to operate.

There are three changes that should have a particular effect on angel investors, a catch-all category which includes everyone from friends and family members who invest in a startup, to unaffiliated wealthy individuals, to side investments made by venture capitalists acting on their own.

Frist, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

And boy, nothing’s gonna help small business like waiting four months for government review, limiting the investor pool and subjecting entrepreneurs to the most restrictive regulations available between the states and the feds.

Several investors have written pointed critiques of the bill:

• Fred Wilson of Union Square Ventures said startups will be “hit by shrapnel” from the bill.
• Robert E. Litan of the Kauffman Foundation, which researches entrepreneurship, wrote, “It is difficult to know why these provisions are in a much larger bill whose primary aim is to address the fundamental causes of the recent financial crisis.”
• Mike Masnick at tech policy site Techdirt described the restrictions as “somewhat horrifying.”

Investors offered more criticism on Twitter, with Slide vice president Keith Rabois tweeting, “Anyone still need more evidence that Obama and the Democrats intend to destroy Silicon Valley and the dreams of entrepreneurs?”

Anyone who didn’t figure that out before November of 2008 shouldn’t be working with other peoples’ money in the first place.

Read the whole thing.

And ask yourselves “why would Chris Dodd, a Senator with connections to Wall Street and the formal banking system so tight that he’d embarass a Republican, introduce a bill like this?”