Presents a response to a letter to the editor about price-level restated accounting and the measurement of inflation gains and losses, published in this issue of the periodical.

The article reports that the effect of inflation on the value of the firm, in the case of monetary items, can be analyzed at three levels. First, the price-level increase gain or loss measures the real losses to income and principal based upon the change in the general level of prices. General price-level accounting methodology presently measures this effect, with exceptions as noted below. Second, the net holding gain or loss measures the net effect of holding monetary items, considering the price-level increase gain or loss and the absolute income or costs of the monetary items. The possibilities of normal gains and losses offsetting or magnifying price-level increase gains and losses make this second consideration important. The third consideration, that of anticipated price-level increases, affects the accuracy of the conclusions reached in the first two levels of analysis. The first two levels assume that inflation is unanticipated and thus ignore the fact that prior adjustments in return could compensate for the gains or losses as found in those analyses.

Reviews the book "Business and Government," by Charles C. Rohlfing, Edw. W. Carter, Bradford W. West and John G. Hervey.

Many writers believe that minority-owned financial institutions can and should play an important role in aiding the economic development of minority communities. Indeed, economic theory describes a major role of financial institutions as gathering many relatively small deposits of households and other economic units, and combining these to support capital formation through lending for business and housing capital investment. The service which minority financial institutions can play may be magnified by the much-discussed inability of minority communities to obtain financing from nonminority financial institutions for business capital investment and–of more recent concern–for housing capital investment. The concept of pooling the savings of ghetto residents and putting the savings to work in financing the development of the inner city community may be sound in theory, but what does the empirical evidence indicate about its practical implementation?

A firm must issue common stock in order to undertake a new investment, and the firm's manager‐owners can value the firm more accurately than the market. The ability of the manager‐owners to trade in the firm's shares during the issue (a) reduces the investments that are foregone because of the market's mispricing the firm's shares, (b) changes the size and direction of the stock price change when the firm announces a new stock issue, and (c) changes the market value of the firm before and after the issue announcement, whether or not it decides to issue.