May 09, 2015

In finance the structurally discriminated are those perceived as “risky”, the SMEs and entrepreneurs

Sir, Gillian Tett refers to an almost all female conference on economic and finance to ask: “whether it is time to organize an all-black or all-Hispanic financial policy-making event of this sort?” “The power of role models” May 9.

And referencing Simon Kuper’s article “How to tackle structural racism” she reflects: “And, if that occurred, would it help to combat that structural discrimination”.

That is off target. In matters of banking, financial reforms and the future of global finance and economics, the truly structurally discriminated, the “all-black or all-Hispanics”, are those perceived as “risky”, like SMEs and entrepreneurs, while the structurally favored, the “all white males”, are “the safe”, like sovereigns and AAArisktocrats.

So we need more a conference with large representation of those perceives as risky. It would be so interesting if Senator Elizabeth Warren who has exposed “constant criticism of Wall Street and of America’s wealthy elite” were also present there. Can you imagine a small entrepreneur asking Senator Warren the following?

“From a credit point of view I am perceived as risky. I therefore face many difficulties to borrow that umbrella from bankers they only want to lend out when the sun shines. I accept that as a natural fact of life. But why must the regulators make it even harder for me to access bank credit, by allowing banks to have much less equity when lending to “the infallible” than when lending to me?

That results in that banks can leverage their equity, and the implicit or explicit support taxpayers give them, much more with the risk-adjusted net margin dollars paid by “the infallible” than when those same dollars are paid by me.

We the “risky” entrepreneurs and SMEs, we hear we are good for the economy, that we generate growth and jobs and, as far as I know, lending to us has never detonated a major bank crisis… so Senator Warren, can you explain to me why is there such an odious regulatory discrimination against us?

There exists an Equal Credit Opportunity Act (Regulation B) and so I must also ask: Senator Warren why does its benefits not extend to us?