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Community Development Banks

Author

Listed:
  • Hyman P. Minsky
  • Dimitri B. Papadimitriou
  • Ronnie J. Phillips
  • L. Randall Wray

Abstract

The Clinton/Gore proposal for the creation of a network of 100 community development banks (CDBs) to revitalize communities is bold, and will contribute to the success of the U.S. economy. Banks are essential institutions in any community, and the establishment of a bank is often a prerequisite for the investment process. For this reason, the creation of banks in communities lacking such institutions is important to the welfare of these communities. The vitality of the American economy depends on the continual creation of new and initially small firms. Because it is in the public interest to foster the creation of new entrants into industry, trade, and finance, it is also in the public interest to have a set of strong, independent, profit-seeking banking institutions that specialize in financing smaller businesses. When market forces fail to provide a service that is needed and potentially profitable, it is appropriate for government to help create the market. Community development banks fall into such a category. They do not require a government subsidy, and after start-up costs, the banks are expected to be profitable. The primary perspective of this concept paper is that the main function of the financial structure is to advance the capital development of the economy-to increase the real productive capacity and wealth-producing ability of the economy. The second assumption is that capital development is encouraged by the provision of a broad range of financial services to various segments of the U.S. economy, including consumers, small and large businesses, retailers, developers, and all levels of government. The third is that the existing financial structure is particularly weak in servicing small and start-up businesses, and in servicing certain consumer groups. The fourth is that this problem has become more acute because of a decrease in the number of independent financing alternatives and a rise in the size distribution of financing sources, which have increased the financial system's bias toward larger transactions. These are assumptions that appear to be supported by the evidence: they are also incorporated in other proposals that advance programs to develop community development banking.

Suggested Citation

  • Hyman P. Minsky & Dimitri B. Papadimitriou & Ronnie J. Phillips & L. Randall Wray, 1992. "Community Development Banks," Economics Working Paper Archive wp_83, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_83
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    Cited by:

    1. Vanna GONZALES & Nigel FORREST & Noreen BALOS, 2013. "Refugee Farmers And The Social Enterprise Model In The American Southwest," Journal of Community Positive Practices, Catalactica NGO, issue 4, pages 32-54.
    2. Hyman P. Minsky & Charles J. Whalen, 1996. "Economic Insecurity and the Institutional Prerequisites for Successful Capitalism," Economics Working Paper Archive wp_165, Levy Economics Institute.
    3. Dimitri B. Papadimitriou & Ronnie J. Phillips & L. Randall Wray, "undated". "An Alternative in Small Business Finance, Community-Based Factoring Companies and Small Business Lending," Economics Public Policy Brief Archive 12, Levy Economics Institute.
    4. Rhonda Phillips & Jay Stein, 2013. "An Indicator Framework for Linking Historic Preservation and Community Economic Development," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(1), pages 1-15, August.
    5. Kenneth H. Thomas, Ph.D., "undated". "CRA's 25th Anniversary: The Past, Present, and Future," Economics Working Paper Archive wp_346, Levy Economics Institute.
    6. Gulnaz Hameed & Abdul Saboor & Atta Ullah Khan & Ikram Ali & Mohsin Khan Wazir, 2017. "Impact of Community Development in Poverty Reduction: Reflections of Azad Jammu and Kashmir Community Development Program," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(3), pages 1073-1086, February.
    7. Dimitri B. Papadimitriou & Ronnie J. Phillips & L. Randall Wray, 1993. "The Community Reinvestment Act, Lending Discrimination, and the Role of Community Development Banks," Economics Working Paper Archive wp_95, Levy Economics Institute.
    8. Gary Dymski, 2009. "Financing Community Development in the US: A Comparison of “War on Poverty” and 1990s-Era Policy Approaches," The Review of Black Political Economy, Springer;National Economic Association, vol. 36(3), pages 245-273, December.
    9. Ronnie J. Phillips, "undated". "Narrow Banking Reconsidered, The Functional Approach to Financial Reform," Economics Public Policy Brief Archive ppb_17, Levy Economics Institute.
    10. Dimitri B. Papadimitriou & Ronnie J. Phillips & L. Randall Wray, "undated". "A Path to Community Development, The Community Reinvestment Act, Lending Discrimination, and the Role of Community Development Banks," Economics Public Policy Brief Archive 6, Levy Economics Institute.
    11. repec:gam:jagris:v:7:y:2017:i:9:p:76-:d:111987 is not listed on IDEAS
    12. repec:ers:journl:v:xx:y:2017:i:3a:p:432-442 is not listed on IDEAS
    13. repec:ers:journl:v:xx:y:2017:i:3b:p:412-420 is not listed on IDEAS
    14. Jayati Ghosh, 2012. "Microfinance and the Challenge of Financial Inclusion for Development," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(67), pages 7-34, December.
    15. James R. Barth & R. Dan Brumbaugh Jr., "undated". "Financing Prosperity in the Next Century, The Changing World of Banking: Setting the Regulatory Agenda," Economics Public Policy Brief Archive 8, Levy Economics Institute.

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