Senate Democrats recast startups bill as investor threat By David Lawder and Sarah N. Lynch WASHINGTON (Reuters) - U.S. Senate Democrats rebranded a bill aimed at job growth as a threat to investor protections on Thursday, proposing revisions that could halt one of Congress' few hopes for bi-partisan cooperation this year. The House of Representatives last week overwhelmingly approved the bill to relax some regulations for smaller companies to allow them to more easily raise capital and offer public stock offerings. More capital means faster expansion for startups and more jobs, lawmakers reasoned. But Democrats in the Senate sought to undo some of these provisions in the wake of warnings from Securities and Exchange Commission Chairman Mary Schapiro and other investor advocates that the House measure would erode investor protections and allow the return of some of the conditions that fueled the destructive tech stock bubble of the late 1990s. Schapiro stepped up her criticism on Thursday, saying the House bill could chip away at firewalls that prevent investment bankers from rewarding analysts for favorable IPO research to lure unsuspecting investor clients. Schapiro, an independent, was appointed to the SEC by President Barack Obama. "We should not walk backwards here," Schapiro said in a speech to a group of business journalists. Collusive behavior between analysts and bankers cost investors huge sums, shattered confidence in the integrity of research, and damaged the markets themselves. The Democratic revisions would address Schapiro's concerns about the firewalls, and they would also significantly limit the number of firms that could benefit from the measure's exemptions from certain costly disclosure, accounting, audit and other regulatory requirements. The House bill had allowed fairly large companies - those with up to $1 billion in annual gross revenue - to qualify for certain key regulatory exemptions after their initial public offerings. Arguing that this would largely free the vast majority of IPO candidates from regulation, the Senate Democrats proposed lowering the threshold to $350 million. This level would capture a greater share of true "startup" firms that need more help, said Senator Carl Levin. "I think we should have all learned from the painful recent past that reducing investor protections against fraud and abuse will not help build a strong economy or create jobs," Levin said. It will threaten our economy and lose us jobs. The Democratic amendments quickly turned the bill from an election-friendly jobs measure seen winning quick approval to one that looked set to succumb to partisan bickering. The amendments would need 60 votes to be adopted, but even if they fail, the Democrat-controlled Senate could kill the original House measure with a majority vote. Republicans wasted no time accusing Democrats of trying to block the measure with parliamentary maneuvers, "partisan provisions" and "poison pills." Senator Jon Kyl, an Arizona Republican, said Democrats wanted to kill the measure so President Barack Obama could continue his re-election campaign against a "do-nothing Congress." If Congress actually does something in a bipartisan way that helps many Americans. Well, it will undermine his narrative," Kyl said on the Senate floor. He's relying on congressional dysfunction to keep that narrative going. Senate Democrats on Thursday also attacked a provision in the House bill that would permit a new capital-raising strategy known as "crowdfunding," which lets investors take small stakes in private start-ups over the Internet. While Democrats said they are not against the idea, they were concerned that Republicans had stripped away far too many regulations that would protect mom and pop investors from predators who seek to prey on people through the internet. They are now seeking revisions, some of which were suggested by Schapiro, that include requiring intermediaries offering the stocks to register with the SEC and provide certain disclosures to investors. Senate Democrats also proposed that the legislation extend the Export-Import Bank's lending authority until 2015 and increase its lending limit to $140 billion from $100 billion. The bank's charter is due to expire on May 31 and it is expected to hit the lending cap in a few weeks. Some Republicans object to this because they believe the Eximbank is displacing private-sector lenders from big trade finance deals and that the taxpayer-subsidized financing it offers to foreign firms can actually hurt U.S. companies. Additional reporting by Doug Palmer; editing by Todd Eastham