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Banks' venture into real estate: high rollers, or lemmings?


  • Lynn E. Browne


During the 1980s, commercial banks expanded their mortgage lending more rapidly than other financial institutions. This article examines the factors responsible for the variations in commercial banks’ real estate lending, in an attempt to determine whether banks pursued real estate loans in a high-risk, high-return strategy, or simply were caught up in the general enthusiasm for real estate lending. ; The author’s regression analysis provides some support for the argument that banks looked to real estate loans to bolster their financial performance. She also finds that in New England, where banks were particularly aggressive in increasing their real estate lending and suffered a much higher failure rate than banks nationwide, pursuit of real estate loans was also pursuit of growth. And in New England, where most banks grew rapidly, those that grew fastest proved most vulnerable to failure.

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  • Lynn E. Browne, 1993. "Banks' venture into real estate: high rollers, or lemmings?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 13-32.
  • Handle: RePEc:fip:fedbne:y:1993:i:sep:p:13-32

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    References listed on IDEAS

    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
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    4. Webb, Michael A., 1987. "Anti-dumping laws, production location and prices," Journal of International Economics, Elsevier, vol. 22(3-4), pages 363-368, May.
    5. Jeffrey A. Hart, 1993. "The Anti-dumping Petition of the Advanced Display Manufacturers of America: Origins and Consequences," The World Economy, Wiley Blackwell, vol. 16(1), pages 85-109, January.
    6. Das, Satya P. & Mohanty, Adwait K., 1984. "Dumping in international markets and welfare : A general equilibrium analysis," Journal of International Economics, Elsevier, vol. 17(1-2), pages 149-157, August.
    7. Barbara J. Spencer & Ronald W. Jones, 1991. "Vertical Foreclosure and International Trade Policy," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 153-170.
    8. Skeath, Susan, 1995. "Quality-Differentiated Inputs and Trade in Vertically Related Markets," Review of International Economics, Wiley Blackwell, vol. 3(1), pages 104-117, February.
    9. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
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    Bank investments ; Real property;


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