ABSTRACT
Large regional banks tend to make loans that meet the needs of the majority of their borrowers, and may not meet the capital needs of small businesses in rural communities. Public capital sets the stage, so to speak, for private capital—controlled by individuals, firms, and institutions like banks—to become active. When banks fail, as they sometimes do, depositors know that their capital is safe because society, in the form of government bank insurance, guarantees it. In Nelsonville, the Brooks Shoe Company found it necessary to go outside the community for large amounts of capital. The federal government is not the only level of government that seeks to foster economic development through investment of capital on behalf of the private sector. When the interest is overdue for a specific period, the loan must be written off the books—it is no longer an asset—and the bank has absorbed the bad loan.
