Petaluma, Calif. - President-elect Barack Obama is preparing to create significant changes in federal contracting law that will allow some of the nation's wealthiest investors to receive federal contracts earmarked for small businesses. Under the banner of "increasing access to capital" for small businesses, the policies will allow firms controlled by individual venture capitalist and even large venture capital firms to participate in federal small business contracting programs.

The Obama Administration's new pro-venture capital policy could virtually repeal the Small Business Act for legitimate American small businesses by modifying the longstanding federal definition of a small business as "independently owned."

Under the proposed Obama Administration policy, "independently owned" will be changed to include firms that are not independently owned, but are actually controlled by wealthy investors and possibly some of the nation's largest venture capital firms.

Opponents of the new policy say it appears to be designed more to increase wealthy venture capitalist access to billions of dollars in federal small business contracts as opposed to "increasing access to capital" for legitimate small businesses.

If the policy is successfully implemented it could force the average American small business to compete head-to-head with firms controlled by wealthy investors for even the smallest government orders for goods and services. Thousands of middle class jobs could be lost as billions of dollars in federal small business contracts are diverted to a small number of venture capitalist controlled firms.

The plan will likely include a provision that would exempt the venture capitalist owned firms from capital gains taxes. The Obama-Biden Transition Team website, www.change.gov mentions such a proposal.

The appointment of multi-millionaire venture capitalist Karen Mills to head the Small Business Administration (SBA) is the latest indication that President-elect Obama is moving forward with his plans to divert government small business contracts to venture capital controlled firms.

The National Venture Capital Association (NVCA) and its members have been lobbying for the new loophole in federal contracting law for more than two years. The NVCA and its members have contributed millions of dollars to Obama and key Democratic leaders in Congress such as Nancy Pelosi, John Kerry, Joe Lieberman and Hillary Clinton. (http://www.maplight.org/map/us/interest/F2500) 

"The easiest and quickest way to stimulate our nation's failing economy is for the government to spend infrastructure funds with America's 27 million small businesses that create all the new jobs and employ most Americans," American Small Business League President Lloyd Chapman said. "This new Obama policy will do just the opposite and will push our economy closer to a depression by diverting billions of dollars in federal funds away from middle class America and into the hands of small number of wealthy investors that backed Obama."