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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. Bradley Christensen & Rhonda Phillips, 2016. "Local food systems and community economic development through the lens of theory," Community Development, Taylor & Francis Journals, vol. 47(5), pages 638-651, October.
    3. Maria Martinez-Cosio & Mirle Rabinowitz Bussell, 2012. "Private foundations and community development: differing approaches to community empowerment," Community Development, Taylor & Francis Journals, vol. 43(4), pages 416-429, June.
    4. Hyman P. Minsky & Charles J. Whalen, 1996. "Economic Insecurity and the Institutional Prerequisites for Successful Capitalism," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(2), pages 155-170, December.
    5. Robert Pittman & Evan Pittman & Rhonda Phillips & Joe Cangelosi, 2009. "The Community and Economic Development Chain: Validating the Links Between Processes and Outcomes," Community Development, Taylor & Francis Journals, vol. 40(1), pages 80-93, May.
    6. Mettenheim Kurt, 2013. "Back to Basics in Banking Theory and Varieties of Finance Capitalism," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 357-405, May.
    7. 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.
    8. 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.
    9. Kenneth H. Thomas, Ph.D., "undated". "CRA's 25th Anniversary: The Past, Present, and Future," Economics Working Paper Archive wp_346, Levy Economics Institute.
    10. 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.
    11. 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.
    12. 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.
    13. Ronnie J. Phillips, "undated". "Narrow Banking Reconsidered, The Functional Approach to Financial Reform," Economics Public Policy Brief Archive ppb_17, Levy Economics Institute.
    14. 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.
    15. Sander Hoog, 2018. "The Limits to Credit Growth: Mitigation Policies and Macroprudential Regulations to Foster Macrofinancial Stability and Sustainable Debt," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 873-920, October.
    16. Mario Del Roble Pensado-Leglise & Andrew Smolski, 2017. "An Eco-Egalitarian Solution to the Capitalist Consumer Paradox: Integrating Short Food Chains and Public Market Systems," Agriculture, MDPI, vol. 7(9), pages 1-15, September.
    17. Michael Rios & Paul Lachapelle, 2015. "Community development and democratic practice: pas de deux or distinct and different?," Community Development, Taylor & Francis Journals, vol. 46(3), pages 190-197, July.
    18. Novianty Djafri & Abdul Rahmat, 2017. "Mapping of Leadership Species Protection for the Sustainable Economic Growth of Local Communities," European Research Studies Journal, European Research Studies Journal, vol. 0(4A), pages 432-442.
    19. Alexander A. Galushkin, 2017. "Operational Management of Enterprise Structures in the Sphere of Education and Science: Problems and Methods for their Solution," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 412-420.
    20. Mikulas Pstross & Craig A. Talmage & Richard C. Knopf, 2014. "A story about storytelling: enhancement of community participation through catalytic storytelling," Community Development, Taylor & Francis Journals, vol. 45(5), pages 525-538, December.
    21. Hrachia A. Kazhoyan, 2011. "A general theory of community-building in its application in a multi-ethnic setting: the Kosovo case," Community Development, Taylor & Francis Journals, vol. 43(2), pages 225-243, March.
    22. Gregg Lichtenstein & Thomas S. Lyons, 2011. "Lessons from the field: mapping Saskatchewan's Pipeline of Entrepreneurs and Enterprises in order to build a provincial operating system for entrepreneurship," Community Development, Taylor & Francis Journals, vol. 43(1), pages 113-129, October.
    23. 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.
    24. Semalegne Kendie Mengesha & Jacquelyn C.A. Meshelemiah & Kasaw Adane Chuffa, 2015. "Asset-based community development practice in Awramba, Northwest Ethiopia," Community Development, Taylor & Francis Journals, vol. 46(2), pages 164-179, April.

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