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Loan sales as a response to market-based capital constraints

  • Charles T. Carlstrom
  • Katherine A. Samolyk

A model of bank asset sales in which information asymmetries create the incentive for unregulated banks to originate and sell loans to other banks, rather than fund them with deposit liabilities. Private information implies that bankers can fund local loans only to the extent that their capital can absorb potential losses. Loan sales are effectively a means of employing nonlocal bank capital to support local investments.

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File URL: http://www.clevelandfed.org/Research/Workpaper/1993/wp9313.pdf
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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 9313.

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Date of creation: 1993
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Handle: RePEc:fip:fedcwp:9313
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  1. Charles T. Carlstrom & Katherine A. Samolyk, 1993. "Loan sales as a response to market-based capital constraints," Working Paper 9313, Federal Reserve Bank of Cleveland.
  2. James, Christopher, 1988. "The use of loan sales and standby letters of credit by commercial banks," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 395-422.
  3. Mark L. Gertler, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," NBER Working Papers 2559, National Bureau of Economic Research, Inc.
  4. Joseph G. Haubrich & James B. Thomson & Raghuram G. Rajan & ary, 1993. "Loan sales, implicit contracts, and bank structure," Proceedings 416, Federal Reserve Bank of Chicago.
  5. Katherine A. Samolyk, 1989. "The role of banks in influencing regional flow of funds," Working Paper 8914, Federal Reserve Bank of Cleveland.
  6. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  7. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
  8. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  9. Stephen D. Williamson, 1984. "Costly Monitoring, Financial Intermediation, and Equilibrium Credit Rationing," Working Papers 583, Queen's University, Department of Economics.
  10. Gary B. Gorton & Joseph G. Haubrich, . "The Loan Sales Market," Rodney L. White Center for Financial Research Working Papers 35-88, Wharton School Rodney L. White Center for Financial Research.
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