by Jeffery W. Gunther and Anna Zhang The banking industry’s treatment of loans has undergone a dramatic transformation over the past two decades. While maintaining their traditional role in originating loans and holding them on their books, banks have become more likely to create and sell securities backed by pools of loans and other debt instruments. Banks’ adoption of the “originate-to-distri...

It is common to view banks as financial intermediaries which take deposits and lend funds, thereby earning profit primarily from the difference between the interest rates they charge for loans and those they pay on deposits. Banks, however, provide a range of other financial services. Each of the major banks, for example, offers insurance, funds management, advisory services, financial markets ...

We present a dynamic structural model of subprime adjustable-rate mortgage (ARM) borrowers making payment decisions taking into account possible consequences of different degrees of delinquency from their lenders. We empirically implement the model using unique data sets that contain information on borrowers’ mortgage payment history, their broad balance sheets, and lender responses. Our invest...

Although the rise in subprime lending and the ensuing wave of foreclosures was partly a result of market forces that have been well-identified in the literature, in the United States it was also a highly racialized process. We argue that residential segregation created a unique niche of poor minority clients who were differentially marketed risky subprime loans that were in great demand for use...

Abstract The unique feature of the rural credit market in China is dominance zero collateral and zero-interest reciprocal lending its long-term coexistence with formal loan. This paper investigates association between constraint prevalence loans China. Based on identification households’ status, we examine effects utilization informal loans. We find that significantly increases borrowers’ relia...

Under what circumstances are interest-bearing loans compatible with an economy without much growth? The question is becoming increasingly important given a tendency towards declining growth in industrialised economies and increasing evidence that continued incompatible environmental sustainability. Previous theoretical work suggests when compound, this results exponentially growing debts imposs...