Banking and commerce: a liquidity approach

Joseph Haubrich () and Joao Santos

No 9907, Working Paper from Federal Reserve Bank of Cleveland

Abstract: This paper looks at the advantages and disadvantages of mixing banking and commerce, using the "liquidity" approach to financial intermediation. Adding a commercial firm makes it easier for a bank to dispose of assets seized in a loan default. This "internal market" increases the liquidity of such assets and improves the bank's ability to perform financial intermediation. More generally, owning a commercial firm may act either as a substitute or a complement to commercial lending. In some cases, a bank will voluntarily refrain from making loans, choosing to become a nonbank bank in an unregulated environment.

Keywords: Nonbank financial institutions; Bank liquidity (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 1999
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Related works:
Working Paper: Banking and commerce: a liquidity approach (1999)
Working Paper: Banking and Commerce: A Liquidity Approach (1999)
Journal Article: Banking and commerce: A liquidity approach (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:fip:fedcwp:9907

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