The Obama Administration thinks that Venture Capital is under regulated.

President Obama and Treasury Secretary Geithner recently declared a need to regulate venture capital firms on the grounds they pose systemic risk to our economy. Nothing could be further from the truth.

Venture capital is focused almost entirely on new technologies of small startup companies, the failure of which assuredly has no effect on the larger economy.

Not only does venture capital in Silicon Valley and elsewhere pose no systemic risk, it provides an essential engine of value-added innovation, invention and job creation. Perhaps more than any other differentiating attribute of American capitalism, venture capital makes our model the envy of the world.

So why would the Obama administration say they want to regulate venture capital firms? Some suggest that it may be an end run in the undeclared war on wealth because venture capital can create enormous fortunes outside of taxable income. But there are several other plausible answers.

It is unwise to attribute to malice alone that which can be attributed to malice and stupidity.

Cross Posted at Power and Control