Lending to Lemons: Landschafts-Credit in 18th Century Prussia
In: Housing and Mortgage Markets in Historical Perspective
AbstractThe following paper describes the emergence of cooperative mortgage credit associations, called "Landschaften" in 18th century Prussia, and thereby tells the history of mortgage-covered bonds. Landschaften facilitated the refinancing of loans for Prussian estates by issuing covered bonds (Pfandbriefe) that were jointly backed by their members. They relied on dual recourse, cooperative structure, joint liability, and local administration to overcome asymmetric information problems related to lending. Their emergence serves as an example for financial innovation in historical mortgage markets. Pfandbriefe exist to this day and are known for their security. Their success goes back to some of the historical features.
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Other versions of this item:
- Kirsten Wandschneider, 2013. "Lending to Lemons: Landschafts-Credit in 18th Century Prussia," NBER Working Papers 19159, National Bureau of Economic Research, Inc.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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