Thursday, December 17, 2015

Fight for the American dream giving opportunities to everyone, but not by using a bank in my backyard


With respect to Opportunity it states: “The concept of ‘opportunity’ draws nearly universal support among Americans, and it’s the core concept of the American Dream. We endorse Truslow Adams’ definition of opportunity as the state of affairs when “each man and each woman shall be able to attain to the fullest stature of which they are capable,” regardless of offer opportunity, in this sense, to all its residents… Progressives generally believe that government should be more active and can be more effective than do conservatives. But this difference shouldn’t obscure the fact that nearly all Americans would prefer to live in a society in which opportunities for self- advancement are more widely available, especially to those at the bottom of the income distribution, than is now the case. 

I have no objections, but, from what I have seen, both conservatives and progressives have ignored how regulators affected the opportunities of The Risky to access bank credit.

Regulators, with their credit risk weighted capital (equity) requirements, allow banks to earn much higher risk adjusted returns on assets perceived as safe, than on assets perceived as risky. And that of course distorts the allocation of bank credit in favor of The Safe, those already favored by banks with lower interests and larger loans, and against The Risky, those already punished by banks with higher interests and smaller loans. And that, by impeding The Risky the opportunity of fair access to bank credit, is of course great driver of inequality.

Why is that so ignored by all who write against increased inequality and in favor of opportunities? Could it be a symptom of let’s fight against inequality, and let’s give everyone opportunities, but never ever with the bank in my backyard doing that?