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Lending to Lemons: Landschafts-Credit in 18th Century Prussia


  • Kirsten Wandschneider


The 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.

Suggested Citation

  • Kirsten Wandschneider, 2013. "Lending to Lemons: Landschafts-Credit in 18th Century Prussia," NBER Working Papers 19159, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19159
    Note: ME

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    References listed on IDEAS

    1. Eddie, Scott M., 2008. "Landownership in Eastern Germany Before the Great War: A Quantitative Analysis," OUP Catalogue, Oxford University Press, number 9780198201663.
    2. Philip T. Hoffman & Gilles Postel-Vinay & Jean-Laurent Rosenthal, 2008. "History, Geography, and the Markets for Mortgage Loans in Nineteenth-Century France," NBER Chapters,in: Understanding Long-Run Economic Growth: Geography, Institutions, and the Knowledge Economy, pages 155-176 National Bureau of Economic Research, Inc.
    3. Wandschneider, Kirsten, 2015. "Landschaften as Credit Purveyors—The Example of East Prussia," The Journal of Economic History, Cambridge University Press, vol. 75(03), pages 791-818, September.
    4. Fohlin,Caroline, 2011. "Finance Capitalism and Germany's Rise to Industrial Power," Cambridge Books, Cambridge University Press, number 9780521396608.
    5. D. M. Frederiksen, 1894. "Mortgage Banking in America," Journal of Political Economy, University of Chicago Press, vol. 2, pages 203-203.
    6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. some history of mortgage-covered bonds
      by René Böheim in Econ Tidbits on 2013-07-01 19:04:00


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    Cited by:

    1. Bonnie G. Buchanan, 2016. "Securitization: A Financing Vehicle for All Seasons?," Journal of Business Ethics, Springer, vol. 138(3), pages 559-577, October.
    2. Buchanan, Bonnie G., 2016. "Securitization: a financing vehicle for all seasons?," Research Discussion Papers 31/2016, Bank of Finland.
    3. Buchanan, Bonnie G., 2017. "The way we live now: Financialization and securitization," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 663-677.
    4. Blackwell, Timothy & Kohl, Sebastian, 2017. "Varieties of housing finance in historical perspective: The impact of mortgage finance systems on urban structures and homeownership," MPIfG Discussion Paper 17/2, Max Planck Institute for the Study of Societies.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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