Elizabeth Warren

Warren Has a Plan To Help the Entrepreneurs She Screwed Over With Dodd-Frank

Warren proposes giving grants to minority-owned small businesses, but regulations she supported reduced access to capital for aspiring entrepreneurs.

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Sen. Elizabeth Warren (D–Mass.) says it can be very difficult to start a business, especially for ethnic minorities, in the United States. She's right, but she has also supported policies that have made that problem worse. 

Warren recently proposed creating a grant program for entrepreneurs of color, something she says will help reduce the disparity in wealth between racial groups in the United States. Her plan calls for the federal government to provide no-strings-attached startup capital to minority businesses, particularly ones run by people with low household wealth. On the campaign trail, Warren argues that "every American should have a fair shot at starting a business," and says that her $7 billion grant program would help level the playing field.

Warren is right about a good bit of this. The racial wealth gap is real, and minority-owned businesses do face unique barriers to entry; strengthening entrepreneurship is one way to close the gap.

But policies Warren has pushed in the past have made it harder for small businesses to form and grow, hurting minority entrepreneurs' ability to create wealth and build futures for their families.

Maybe the best example is the Dodd-Frank Act, passed by Congress in response to the financial crisis that brought about the Great Recession. While Warren wasn't yet a senator when the law passed in 2010, she advocated for the law and helped lead its administration at the newly-created Consumer Finance Protection Bureau. Dodd-Frank is massive, and some provisions have had an outsized effect on community banks and limited access to credit for small businesses—in particular, the requirement that banks with over $50 billion in assets undergo a series of stress tests has slammed community banks, forcing closures and consolidation. 

Access to credit is a critical issue for small businesses and startups of all stripes. For minorities in the United States, it can be particularly difficult to get a loan for a small business. In a 2016 study, the Federal Reserve Banks of Cleveland and Atlanta found evidence of discrimination by financial institutions against minority businesses, but the bigger program is that black and Hispanic Americans tend to have lower net worths, lower credit scores, or a lack of credit history altogether. That makes it harder to get enough credit to start a business. 

Warren recognizes this problem: She points out that the average African-American small business owner starts with $35,000 in startup capital, a third of what the average white entrepreneur starts with, and African-American entrepreneurs receive only 3 percent of the outside investment white entrepreneurs receive. But regulations in the Dodd-Frank banking law actually make it much harder for aspiring small businesses to get loans. 

According to the Federal Reserve Bank of Dallas, loans to small businesses as a share of commercial and industrial loans has fallen by 9 percent since the passage of Dodd-Frank in 2010. And when banks cut back on small business loans, they're likely to reduce loans to marginal borrowers—people with lower credit scores, oftentimes minorities.

It's a problem that the minority-owned business community has been talking about for years. Shortly after Dodd-Frank's passage, Javier Palomarez, the United States Hispanic Chamber of Commerce president, wrote in The Washington Post about how regulations squeezed out countless minority entrepreneurs with thin credit histories, for whom access to credit is their "single largest challenge."

While tightening of the credit system was intended to reduce the risk of default, he wrote, it also "creates difficult burdens for individuals who are not high risk, but simply have low credit scores or a thin credit history."

More recently, the nonprofit group Prosperity Now highlighted the stories of African-American entrepreneurs across the South. Their stories are telling. People like Kayla (a pseudonym), a household service entrepreneur, lack the credit history to get a loan to expand her business, which would mean hiring employees and taking cleaning contracts with larger clients. Or entrepreneurs like "Jeremy," a used car dealership owner who had to turn to online lenders to finance car purchases, because traditional banks weren't on board with the risks associated with a used car dealership.

Warren's approach is welcome in some ways. But before proposing an expensive new program* for minority-owned businesses, she needs to realize that the problem she intends to solve was created, in part, by excessive regulations reducing access to credit, and pushing out marginal borrowers who lack a long credit history. 

*CORRECTION: In the final paragraph, this post originally described Warren's proposal as a business loan program. It would distribute grants instead.  

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  1. Makes perfect sense if, like Liz believes, all financial transactions, indeed the flow of all money, should be to, from, or through government.

    You can have a “business” but revenue will be from the feds, customers will use fed transfer dollars, and any “profit” (soon to be rebranded as social injustice surplus) belongs to the feds.

    1. I have an alternate plan for Liz. Resign in disgrace. Write a suicide note where she finally takes responsibility for her evil, and then follow through on the suicide.

      I suspect that won’t be happening though.

  2. “Warren recently proposed creating a grant program for entrepreneurs of color, something she says will help reduce the disparity in wealth between racial groups in the United States.”

    Isn’t that against the Civil Rights Act and the Fourteenth Amendment?

    Does affirmative action normalize racial discrimination by the federal government?

    Is this just Warren trying to inoculate herself against charges of having gamed the affirmative action mentality herself?

    1. And even if it were legal, it’s just another handout that people will figure out how to game. All the money will still go to businesses with the right connections.

    2. Her opponents should just play the clip of the radio host (charlemagne?) calling her Rachel Dolezal – on loop

    3. Actually, Mr. Schultz, she wants to be able to get a grant for herself.
      She’s part Native-American.
      She has said so many times, and it must be true since she was accepted to a prestigious Ivy League school based on her “minority status.”
      After all, she wouldn’t lie, especially during election time.

  3. the requirement that banks with over $50 billion in assets undergo a series of stress tests has slammed community banks, forcing closures and consolidation.

    There were community banks with over $50 billion in assets?

    Funny, the definition of a community bank is:

    The tables that follow are segmented by bank total assets size in order to present trends across all segments of Community Banks (banks and thrifts with under $10 billion in total assets). This view provides a better perspective on activity and changes among the large population of community banks and thrifts that serve local communities across the U.S. and where these community banks and thrifts are chartered and located. Data is as of Q1 2019 from FDIC Call Reports.

    https://www.bankingstrategist.com/community-banks-number-by-state-and-asset-size

    Actually, banks of all sizes have thrived since Dodd-Frank was passed.

    1. Actually, banks of all sizes have thrived since Dodd-Frank was passed quantitative easing.

    2. Why are you still posting here after Reason banned you?

    3. Whaddya know- FACTS.

      And pardon me but I’m not gonna cry about Dodd-Frank. It wasn’t wall street or entrepreneurs who got screwed in the recession – it was the rest of us.

    4. Hey Kiddie Raper, I’m done being nice to you, and coddling you here all the time. Fucking kill yourself. I’ll bet you family throws a blow out party to celebrate. Especially any younger relatives and in-laws you’ve been molesting.

      Not even sure what you’re doing here in the first place. Shouldn’t you be on the dark web on some NAMBLA chat room? Talking about that eight year old that got away from your windowless panel van?

  4. People like Kayla (a pseudonym), a household service entrepreneur, lack the credit history to get a loan

    Gee, “lacks credit history”? Maybe that is why Kayla can’t get a loan.

    1. Cool but, why are you still posting here after Reason banned you?

    2. Hey Kiddie Raper. You got lost on the way to your NAMBLA chat room. Or have you moved on to child murder yet? Most psychopathic predators like you tend to escalate their habit over time. Eventually you’ll probably need the kids to be dead before you’re doing more than pushing rope. Like the one in Russia during the 80’s. Like him, your probably impotent with an actual woman.

  5. Oh wonderful. Federal grants to open businesses. So now the minorities have to compete with the politically connected as well.

  6. Bitch would like to have more self-employed people to scold and accuse of not paying taxes and not worshiping Government Almighty sufficiently.
    The sooner this old lying hag takes a dirt nap, the better.

  7. Yay segregation!

  8. Between this and gay reparations, she’s offering quite a bit.
    Though, it is hard to trust an Indian giver

    1. Gay reparations? Is that real?

      1. Yes, though it’s not that bad.
        Still bad, but not as bad as out and out reparations.
        Something about refunding gay couples for not being able to joint file taxes in the past

    2. What’s that, free analplasty?

  9. “Warren Has a Plan To Help the Entrepreneurs…”

    Are you really this stupid, Mr. Muresianu?

    1. He didn’t say it was a good plan.

  10. please run Elizabeth Warren for president. please.

  11. A WOMAN A PLAN PANAMOWA . Makes perfect sense.

  12. Christ, what a cunt.

  13. Give me my grant, I am 1/1024 Native American. At least that’s what I have been told. Maybe that much African American. One drop of blood you know.

    Another racist proposal from someone who abused it for her own benefit. Disgusting.

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