CNN "American Morning" - Transcript

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(COMMERCIAL BREAK) VELSHI: Republicans are putting some job proposals of their own on the table. Majority Whip Kevin McCarthy says one of them would make it easier for small businesses to grow and to hire more Americans.

Joining me now from Washington is republican Congressman Kevin McCarthy, the majority whip. He's also the co-author of "Young Guns." He's a member of the Financial Services Committee. Congressman McCarthy, thank you for joining us.

REPRESENTATIVE KEVIN MCCARTHY (R), CALIFORNIA: Thanks for having me.

VELSHI: You are attempting to address one of the biggest complaints that we constantly hear out there. Christine and I are constantly listening to people saying one of the problems that small businesses have in expanding right now is the inability to raise money. You want to tackle that with your bill. Tell me how?

MCCARTHY: I want to tackle it with my bill because fundamentally, we have a law on the books from 1933 that if you have a great idea, and I started my first business when I was 20 years old.

But the rule says if I want to go find capital outside of a bank, I have to have a pre-existing condition or relationship with any of these individuals.

I didn't know people from the other side of the track, so I have to register with the SEC. We're going it wipe that away. Allow the idea to find the accredited investor to invest in the idea to spur the economy.

VELSHI: Just so our viewers know. An accredited investor is typically the one that invests in venture capital or a hedge fund. It's an investor that has --

MCCARTHY: A credit investor has a million dollars in assets and makes at least $200,000 a year.

VELSHI: Which is what I'm saying that's the typical investor that invests in a hedge fund or a venture capital. They're not the kind of investor that invests in your local small business. So what kind of businesses are you hoping to spur with this?

MCCARTHY: Well, this is the idea. You can now go out, advertise, solicit individuals that have capital like that to invest in your small business.

My small business happened to be when I was 20 years old, a deli. I wanted to expand it. The government was going to hold me back, cost me thousands of dollars to register with the SEC.

Instead of using the internet, going out and say, somebody with money, I have a great idea. Invest with me different than a bank. So I don't have to pay monthly payments. I set the term where it goes and I start new businesses. VELSHI: OK, so it's an interesting idea. Here's my question. Of those businesses that are not expanding, there are a couple of reasons why, right? One is, I don't know how much of it is true, but some say there's uncertainty in health care relations, I'm not expanding. Others say I can't get money from the bank, I'm not going to expand. Others say the demand is not there, I'm not going to expand. How much of the problem of businesses not expanding do you think changing this law will have an affect upon?

REP. KEVIN MCCARTHY, (R-CA), HOUSE MAJORITY WHIP: It's not the end-all, but a big beginning of it. What you'll find, if you go back to the end of the last recession, the beginning of this recession, 2001 to 2007, a good time in America, and you measure job growth, well, if you were a company with 500 employees or fewer you added seven million new jobs. If you had a company with 500 employees or more, you cut one million.

VELSHI: Right.

MCCARTHY: Of those seven million new jobs, 60 percent came from companies five years old or younger. The entrance to the market is too great, you won't have the job growth. If you measure today, start-ups in America are at the 16-year lowest point.

VELSHI: Right.

MCCARTHY: The interest to market is too great. One of that is regulation, one is access to capital. If have a great idea, you want to make sure capital finds its way.

(CROSSTALK)

VELSHI: Let me ask you this then. Let's say you're talking about this deli, for instance.

MCCARTHY: Sure.

VELSHI: We're looking for investors for this deli. You're trying to expand into five delis. Why would that investor, that accredited investor with $1 million or more, why would they choose the deli when that's not really a high-growth industry. And the point I'm trying to make is a lot of the companies that can't get loans from banks are companies that are not high-growth industry and the bank says you're not a great bet.

MCCARTHY: What about when you start out the first deli of a Subway? Stephen Jobs starting out in a garage?

VELSHI: Right.

MCCARTHY: What about Facebook starting in a dorm room? A good idea will find the capital if you unshackle it and allow it to happen. Right now, government makes you register to --

(CROSSTALK) VELSHI: You just gave three examples of companies that did start from virtually nothing and did get all the capital in the world that they needed.

(CROSSTALK)

MCCARTHY: Yes, and how many -- how many thousands of them that had ideas that couldn't get there? How many people had to sell out ahead of time? I'll tell you, in my business itself, when I was going out, the government told me I could not talk to the individual unless I already had a relationship with them.

(CROSSTALK)

MCCARTHY: You know what? I came from the wrong side of the tracks.

VELSHI: You can have family and friends invest in your business. You're saying, if you don't know who they are --

(CROSSTALK)

MCCARTHY: Yes, but if you know my family, we don't have much money.

VELSHI: I hear what you're saying.

MCCARTHY: I needed to have a different family.

VELSHI: I love the fact you're thinking creatively about this. And this is how we have to think about dealing with our jobs problem in this country. But what some accuse the president of doing right now is tinkering around the edges. In fairness, this is tinkering around the edges. I think it's neat.

MCCARTHY: Well, yes --

(CROSSTALK)

VELSHI: And if you tinker around the edges with 20 different programs, you might create a lot of jobs, right?

MCCARTHY: If small business creates seven million jobs and those big corporations cut one million during those times, I think enhancing anything to small business will help creation.

VELSHI: Which means --

(CROSSTALK)

MCCARTHY: But the other thing --

(CROSSTALK)

VELSHI: OK, go ahead. MCCARTHY: -- you make a good point. We have an overall plan with the American job creators. We have the forgotten 15 bills sitting in the Senate that would help not only our energy policy but job creation as well. This is just one element that's passing through Financial Services and it comes to the point. These bills can continue to pass and send over to the Senate, nothing will happen. We need to have a long-term plan. This is a small thing that can help long term.

VELSHI: Right. I think sometimes small ball is the way to win it, too. You come up with a lot of small ideas and some big ones, and we've got to attack the problem any way we can.

So, Representative McCarthy, I appreciate you coming on and telling us about the plan. I think it's creative and interesting and we'll watch with interest.

Kevin McCarthy is a Republican from California. He's Majority whip, making him the third-highest ranking Republican Congressman, member of the Financial Services Committee and the co-author of "Young Guns."

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