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The Review of Black Political Economy

, Volume 23, Issue 1, pp 9–24 | Cite as

The cost of government deposits for black-owned commercial banks

  • Gregory N. Price
Articles

Abstract

This article utilizes a Statistical Cost Accounting Model and Mean Variance Model to estimate the cost and potential risk impact of government deposits for black-owned commercial banks. The main findings are that relative to other types of deposits on the balance sheet, government deposits are expensive, and that deposits received through the Minority Bank Deposit Program may have the effect of increasing risk in the asset portfolio.

Keywords

Total Asset Balance Sheet Equity Capital Portfolio Weight Asset Portfolio 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 1.
    W. L. Scott, M. J. Gardner and D. L. Mills, “Expense Preference and Minority Banking: A Note,”Financial Review, 23 (1988) 105–115.CrossRefGoogle Scholar
  2. 2.
    See J. T. Boorman, “The Prospects for Minority-Owned Commercial Banks: A Comparative Performance Analysis,”Journal of Bank Research, 4 (1974) 263–267.Google Scholar
  3. 3.
    D. D. Hester and J. F. Zoellner, “The Relation Between Bank Portfolios and Earnings: An Econometric Approach,”Review of Economics and Statistics, 48 (1966) 372–380.CrossRefGoogle Scholar
  4. 4.
    See for example E. L. Feige and P. A. V. B. Swamy, “A Random Coefficient Model of the Demand for Liquid Assets,”Journal of Money, Credit, and Banking, 6 (1974) 241–252.CrossRefGoogle Scholar
  5. 5.
    See J. T. Rose and J. D. Wolken, “Statistical Cost Accounting Models in Banking: A Reexamination and an Application,”Staff Studies, No.150 (1986), Board of Governors of the Federal Reserve System, Washington, D.C. For a more recent application see Thomas P. Bundt and Robert Schweitzer, “Deregulation, Deposit Markets, and Banks’ Costs of Funds,”The Financial Review, 24 (1989) 417–430.Google Scholar
  6. 6.
    See E. Brewer, “The Impact of Deregulation on the True Cost of Savings Deposits,”Journal of Economics and Business, 40 (1988), 79–95.CrossRefGoogle Scholar
  7. 7.
    See Title 31, Code of Federal Regulations, part 202, section 6, (31 CFR 202.6).Google Scholar
  8. 8.
    See R. Merton, “An Analytical Derivation of the Efficient Portfolio Frontier,”Journal of Financial and Quantitative Analysis, 7 (1972) 1851–1872.CrossRefGoogle Scholar
  9. 9.
    See for example W. B. Arthur, “On Learning and Adaptation in the Economy,”Santa Fe Institute Working Paper, 92-07-038 (1992).Google Scholar
  10. 10.
    A data appendix is available upon request from the author.Google Scholar
  11. 11.
    See Boorman (1974).Google Scholar
  12. 12.
    See M. L. Kwast and H. Black, “An Analysis of the Behavior of Mature Black-Owned Commercial Banks,”Journal of Economics and Business, 35 (1983) 41–54.CrossRefGoogle Scholar
  13. 14.
    See Rose and Wolken (1986).Google Scholar
  14. 15.
    The vector of nonnegative weights is relevant because for the class of assets in which the SCAM is estimated, short positions are not permissible. For the types of assets that commercial banks can hold short see Report of Condition, Schedule RCL, Board of Governors of the Federal Reserve System, Washington, D.C., various years.Google Scholar
  15. 16.
    See Brewer (1988).Google Scholar

Copyright information

© Springer 1994

Authors and Affiliations

  • Gregory N. Price

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