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The Woman Who Has a Plan for Wall Street to Help Cure Blindness
Karen Petrou spent years trying to hide her blindness. Now she has come up with a plan to get private investors to bankroll a cure.
Karen Petrou (center), her guide dog, Zuni (left), and Matthew Shaw, a research analyst (right), at Ms. Petrou’s office, Federal Financial Analytics Inc., in Washington, D.C., on Aug. 16. PHOTO: MATT MCLOONE FOR THE WALL STREET JOURNAL
Karen Petrou, an influential adviser to bankers and regulators, has made a career of deciphering complicated financial regulations. Now she’s trying to decode another type of puzzle.
The conundrum: Matching medical researchers who need money with investors who have it. A bill outlining her strategy, which would include a government guarantee, was introduced in the House of Representatives last month.
Her goal, to cure blindness, is lofty, and her crusade is personal. Though Ms. Petrou, who runs policy-analysis firm Federal Financial Analytics Inc., consumes dense regulatory tomes faster than perhaps anyone in Washington, it has been years since she could see.
Ms. Petrou, 65, is unsentimental about finance, where the sharp contours of profit trump the squishy metrics of doing good. But she also believes that pension funds, insurers and others will invest in her so-called Eye Bonds if they can make money doing it. The plan, which she designed with her husband and business partner, Basil, envisions a five-year pilot that would finance up to $1 billion in loans for organizations doing early-stage research on blindness.
“In the scheme of Wall Street, it’s lunch money anyway,” Ms. Petrou said. “And maybe it appeals to what’s left of their heartstrings.”
Under their proposal, labs and others would get a stamp of approval for projects deemed promising by the National Eye Institute, a designation that could help them line up loans.
The lenders would sell the loans to an Eye Bond Trust administered by financial institutions that would package and sell the loans to investors—she envisions 10-year bonds. Investors would be repaid both the principal and interest when the bonds mature, and if a lab’s project turned into a commercial success, the investors could get equity. A government guarantee would partially protect investors if the labs couldn’t repay.
Karen Petrou and her guide dog, Zuni, take a morning walk in Rock Creek Park in Washington, D.C., on Aug. 16. PHOTO: MATT MCLOONE FOR THE WALL STREET JOURNAL
Ms. Petrou grew up in a liberal-leaning home in Westchester County, to an artist mother and book-publisher father. As a child, she once challenged the rabbi teaching her Sunday school class to “an intellectual disputation,” said her mother, Blanche Dolmatch. As a teenager, she donned a Colonial dress and mobcap to give tours of Philipsburg Manor in Sleepy Hollow, N.Y.
“She was always good at making speeches and instructing on things, and blowing off intellectual steam,” Mrs. Dolmatch said.
In high school, Ms. Petrou was diagnosed with retinitis pigmentosa, a disorder that causes gradual vision loss. “We just kind of staggered out of the place,” Mrs. Dolmatch recalled.
Within a few years, acquaintances complained that Ms. Petrou didn’t say hi when she passed them. Her peripheral vision was failing.
At the same time, she was working on a doctorate in political science at the University of California, Berkeley. But she took a job in banking, figuring it would offer more opportunities for women than academia.
For a while, it did, and Ms. Petrou rose through the ranks in political analysis and public affairs at San Francisco-based BankAmerica Corp. When she was 32, the CEO told her he wasn’t comfortable promoting a young woman to senior vice president, according to Ms. Petrou. She left soon after.
Since then, she has built out her firm and gained a reputation for knowing the minutiae of esoteric regulations and their big-picture repercussions. Both banks and regulators hire her to provide a nonpartisan analysis of the potential effects of new policies. “I’m not coming up with loopholes,” Ms. Petrou said.
Rodgin Cohen, senior chairman of Sullivan & Cromwell LLP, met Ms. Petrou in the early 1990s when they worked on the merger of Mellon Bank Corp. and Dreyfus Corp., a controversial proposal at the time because it combined a bank and a mutual-fund business.
“She gave a very broad-based view of everything that was going on—how the regulators would work, how Congress would react, and how the media would react,” Mr. Cohen said. “It was typical of her approach and forthrightness.”
Along the way, Ms. Petrou’s sight continued to deteriorate. She lost her reading vision six months after starting her firm. Wary of being pitied or stereotyped, she would tell people she couldn’t see a menu because she had lost a contact lens.
Today, she is almost completely blind, though many of her clients don’t know until her German shepherd guide dog, Zuni, trundles into their boardroom. She ingests volumes of ponderous regulatory documents by listening to screen-reading software at 400 words a minute, pausing to type her analysis for clients.
Karen Petrou and her guide dog, Zuni, commute to work in Washington, D.C., on Aug. 16. PHOTO: MATT MCLOONE FOR THE WALL STREET JOURNAL
“If you are going to challenge Karen on a fact, you better be right,” said Pete Mills, who worked for Ms. Petrou and is now head of residential public policy for the Mortgage Bankers Association. “You can’t get anything by her.”
In recent years, Ms. Petrou has grown more outspoken about the widening gap between rich and poor, including her belief that postcrisis government policy has exacerbated the problem. In a lecture to the Federal Reserve Bank of New York this year, she scolded central bankers for years of ultralow interest rates. Her take: The policy has boosted the stock market, which benefits investors, but harmed families trying to set aside savings.
With Eye Bonds, the Petrous aren’t looking to reinvent themselves but to be heard on a different issue. They believe the obstacle to curing blindness isn’t a lack of science but a lack of funding. Though it is early days for Eye Bonds, they hope their structure or something similar could be applied to other diseases.
“People always say, ‘Why is this for blindness?’” Ms. Petrou said. “And I say, ‘Well, I’m blind, so let’s start with that.’”
Write to Christina Rexrode at christina.rexrode@wsj.com
