Monday, January 26, 2015
Bank regulators, and because these borrowers are perceived as absolutely safe, allow banks to have much less equity when lending to sovereigns and the AAArisktocracy, than when lending to “risky” small businesses and entrepreneurs.
And that means that banks make much higher risk adjusted returns on equity when lending to the safe than when lending to the risky… and bonuses receiving bankers of course love it.
Some bankers, those who use very low equity requirements as hormone supplements, in order to grow into Too-Big-To-Fail-Banks, love it especially much.
And the bankers love it so much they do not care one iota about that this effectively blocks “The Risky” from gaining fair access to bank credit; or about that this pushes our economies more into the hands of the unholy alliance of governments, AAArisktocrats and some few TBTF-banks.
Yes, we citizens, we who need our banks to give small businesses, entrepreneurs and start-ups lots of access to bank credit, because that is how the future of our grandchildren is financed, we have been betrayed.
We are told that this is all in our best interest, because that is the way banks avoid taking the risks which would cause us tax-payers having to pay for supporting failed banks. Lies, lies, lies!
What’s so good about low taxes when these stand in the way of our possibilities of high pre-tax earnings?
And, on top of it all, the real risk for banks never really exist for that which is perceived as "risky", it always derives from that which is perceived as "absolutely safe"… like “infallible sovereigns” and splendid credit ratings.