August 02, 2012

How can you get growth when regulators order banks to dump small business and entrepreneurs?

Sir, David Rosenberg tries to get a grip on why the US economy, which given the extent of how the spending spigots have been turned on, should have delivered 8 percent grow, is barely coming up with more than 2 percent. “Credit bust scars will take years to heal in aftershock era”, August 2. 

Like most experts Rosenberg ignores as one of the explanations the fact that current capital requirements discriminate based on perceived risk. That leads not only to holding back natural risk-takers like small businesses and entrepreneurs, those whose actions are so necessary for growth, but, worse yet, that even forces the banks to dump more the “risky” than the “not risky”, as doing business with the first requires so much more of that everyday scarcer bank capital.