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

Listed author(s):
  • 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19159.

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Date of creation: Jun 2013
Publication status: published as Lending to Lemons: Landschaft Credit in Eighteenth-Century Prussia , Kirsten Wandschneider. in Housing and Mortgage Markets in Historical Perspective , White, Snowden, and Fishback. 2014
Handle: RePEc:nbr:nberwo:19159
Note: ME
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  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, December.
  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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