242 research outputs found

    Uniform Accounting

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    Uniform accounting: a tentative proposal submitted by the Federal Reserve Board

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    The following tentative proposal for a uniform system of accounting to be adopted by manufacturing and merchandising concerns appeared in the April (1917) number of the Federal Reserve Bulletin, and is now reprinted for more general distribution. It is recognized that banks and bankers have a very real interest in the subject, because they are constantly passing upon credits based upon statements made by manufacturers or merchants. It is quite as much of vital interest to merchants and manufacturers, because they realize that their credit sometimes suffers by reason of losses incurred by bankers through credits given to merchants and manufacturers whose statements do not correctly reflect true conditions. Lastly, it is of immense importance to auditors and accountants, because they have a professional as well as a practical interest in having the character of their professional work thoroughly formulated and standardized. Losses incurred by bankers by reason of credits given to merchants or manufacturers, if such credits were given because the statements were either actually false or misleading in their nature, tend to discredit accountancy as a profession and to shake the confidence of bankers in the real value of any statements. Hence it is that the Federal Reserve Board puts out this tentative proposal with the hope of encouraging the fullest criticism and discussion

    Verification of financial statements, revised May, 1929

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    As a first step toward standardization the Federal Trade Commission in 1917 requested the American Institute of Accountants to prepare a memorandum on procedure. A memorandum was prepared and approved by the council of the Institute. After approval by the Federal Trade Commission the memorandum was placed before the Federal Reserve Board for consideration. The Federal Reserve Board, after conferences with representatives of the Federal Trade Commission and of the American Institute of Accountants, accepted the memorandum, gave it tentative indorsement, and submitted it to bankers and banking associations throughout the country for their consideration and criticism. The memorandum was subsequently published in pamphlet form and was reprinted several times. The recommendations in the memorandum have been on trial more than 10 years, and various criticisms and suggestions for minor changes have been made. Some professional accountants regard the original program of procedure as more comprehensive than their conception of a so-called balance-sheet audit but not more than is required in the preparation of statements to be submitted by persons or companies seeking credit or loans of cash. Some accountants have felt that all the instructions were not as clear as they might be. Others have said that the procedure would not bring out all the desired information. The suggested form of certificate did not, perhaps, make it plain that the examination was not a complete audit of the accounts, and it was to that extent misleading. After consideration of the desirability of a revision of the bulletin the American Institute of Accountants appointed a special committee to deal with this and certain other matters. The result of the labors of that committee is submitted in this revised edition, which represents what the Institute believes to be the best modern practice of the profession

    Central bank independence and political pressure in the Greenspan era

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    This paper investigates whether political pressure from incumbent presidents influences the Fed’s monetary policy during the period that Alan Greenspan was the chairman of the United States Federal Reserve Board. A modified Taylor rule - featuring the inflation rate and the unemployment gap rather than the output gap - with time-varying coefficients will be used to test well-known political-economic theories of Nordhaus (1975) and Hibbs (1987). This novel approach addresses some of the disadvantages of Ordinary Least Squares, and has the additional benefit of allowing the use of mixed frequency data. Our findings suggest that the Fed under Greenspan did not create election driven monetary cycles, but was less inflation avers with a Democratic president

    Bridging the Gap: Credit Scores and Economic Opportunity in Illinois Communities of Color

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    This report analyzed credit score data from a major national credit bureau in large Illinois zip codes and found significant disparities in credit characteristics between communities of color and predominantly white communities, as well as between major metropolitan areas and non-metropolitan areas. The report explains the importance of credit scores and how they are used, and recommends several policies to improve economic opportunity for people and communities impacted by low credit scores. Included is an appendix with demographics and credit score averages and distributions for large Illinois zip codes

    Testing Speculative Behavior in Farmland Demand

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    Substantial increases in farmland demand in sub-urbanization have had profound effects on agriculture and produced a surge in farmland values. With escalating land values, farmland can take on the characteristics of a speculative asset and farmland owners may be more responsive to the investment value of farmland than the productive value. Speculation has been shown to have a significant impact on the agricultural production decisions of farms, and may encourage farmers to curtail capital investments and prematurely idle productive farmland. This paper investigates the effects of farmland value appreciation on agriculture and isolates the speculative component of land use demand, using New Jersey as a case study. A conceptual model of land use and investment behavior is developed and estimated. Two empirical models are used in the analysis; one that accounts for speculation and one that does not. The former is found to be superior. An inverse relationship is estimated between the rate of appreciation and the demand for farmland, suggesting a direct relationship between appreciation and land supplied to development. The relationship, however, is found to be positive at rates of farmland value appreciation in excess of the risk free rate of return. This suggests an identifiable speculative demand component whereby farmland owners retain farmland at high rates of appreciation. Results also support the conjecture that when the rate of appreciation is lower than the risk free rate, the speculative behavior of farmland owners is to keep less land in agriculture.Land Economics/Use,

    The Stock Market Crash of 1929: Irving Fisher Was Right!

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    In the fall of 1929, the market value of all shares listed on the New York Stock Exchange fell by 30 percent. Many analysts then and now take the view that stocks were then overvalued and the stock market was in need of a correction. Irving Fisher argued that the fundamentals were strong and the stock market was undervalued. In this paper, we estimate the fundamental value of corporate equity in 1929 using data on stocks of productive capital and tax rates as in McGrattan and Prescott (2000, 2001) and compare it to actual stock valuations. We find that the stock market in 1929 did not crash because the market was overvalued. In fact, the evidence strongly suggests that stocks were undervalued, even at their 1929 peak.

    Book Reviews Additions to the Library, March 1918

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    Modeling loan losses a macroeconomic approach

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    A sound banking system is essential to a well-functioning economy. With the financial crisis beginning in 2007, a renewed interest in the safety of financial institutions has dominated both the political and financial landscape. Mounting loan losses in real estate lending led to the failing of over 460 banks from 2008 to 2012. This crisis is not unique; in fact, the Savings & Loan Crisis of the 1980\u27s to early 1990\u27s led to the closure of 700 savings institutions. Both instances created a panic in financial markets and heavy losses to deposit insurance funds. These losses are ultimately borne by taxpayers and prudently managed banks, especially if the insurance fund requires re-capitalization. The focus of this paper is on explaining the contributing factors to different categories of loan losses. Namely, total loan losses, residential real estate loan losses, commercial real estate loan losses, and commercial and industrial loan losses are examined. A multivariate regression approach is taken in this paper to explain the four rates of loan losses for the period of 2001 to 2012. Aggregate macroeconomic data from 2001 to 2012 is used to explain loan losses across categories. It was found that the delinquency rate of loans, the consumer financial obligations ratio, and the financial crisis were all significant factors in explaining loan losses
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