In recent history, it looked to many as if rural financial markets would become dominated by large banks that offered relatively expensive credit to agricultural firms. However, the 1990's have seen a resurgence in smaller banks with a focus on smaller, agricultural producer loans. Moreover, small banks may be more competitive than ever with respect to interest rates. This report outlines some ...

to such loans? This question is important to monetary policy. Like other central banks, normally the Fed makes loans to banks through its discount window. This credit has long been thought to be an important tool for responding to financial strain. But if banks are reluctant to borrow from the Fed because of a stigma attached to such loans, then the Fed’s ability to provide liquidity as a lende...

The private market of student loans has become an important source of college financing in the U.S. Unlike government student loans, eligibility conditions on student loans from the private market are based on the credit history of the student and the parents, who often serve as cosigners. In addition, interest rates on private loans vary significantly with credit scores (from 7.4 to 15.4 perce...

We analyze lending contracts when social sanctions are used to enforce repayments and borrowers di¤er in their unobserved sanctioning abilities. Symmetric group loans are preferred to cosigned loans when borrowers are relatively equal, and cosigned loans are preferred when borrowers are unequal. This explains why microlenders that target the poor (e.g., the Grameen Bank) use symmetric group loa...

This paper studies loan collateral and relationship banking. A firm has different loans (e.g. short-term and long-term loans) and alternative collateral assets. How does it allocate the collateral assets between the loans? It optimally secures a long-term loan with collateral that incurs high information costs initially and has a strong learning effect during the loan period (e.g. accounts rece...

This paper studies peer-to-peer (p2p) lending on the Internet. Prosper.com, the first p2p lending website in the US, matches individual lenders and borrowers for unsecured consumer loans. Using transaction data from June 1, 2006 to July 31, 2008, we examine what information problems exist on Prosper and whether social networks help alleviate the information problems. As we expect, data identifi...

Copyright (1994) This paper places a new interpretation on the traditional evolutionary account of money and banking institutions. This allows the development of a new conceptual framework for a monetary model called the Loans Standard. The Loans Standard has an institutional structure that minimizes the transaction costs of using exchange credit (i.e. money). Developments within the existing s...

The failure or success of the banking industry depends largely on the industry’s ability to properly evaluate credit risk. In the consumer-lending context, the bank’s goal is to maximize income by issuing as many good loans to consumers as possible while avoiding losses associated with bad loans. Mistakes could severely affect profits because the losses associated with one bad loan may undermin...

Student loans and credit card loans represent important components of young households’ portfolios in the United States. While default rates on credit card debt are at historically low levels, default rates on student loans have increased significantly in recent years. There are important institutional differences between bankruptcy arrangements and default consequences in the two markets, whic...