Oil and Water Do Not Mix, or: Aliud Est Credere, Aliud Deponere

Philipp Bagus, David Howden and Amadeus Gabriel ()

Journal of Business Ethics, 2015, vol. 128, issue 1, 197-206

Abstract: The financial crisis has led to new interest in the ethics of financial markets. In this article, we further the debate on the nature of banking contracts by showing that the fundamental subjective purposes of loan and deposit contracts are irreconcilable. Any resultant mixture of the two contracts is a legal aberration. We consider a mutual fund as an important and legitimate alternative to the common demand deposit to provide high liquidity and some yield without offering full availability of a nominal sum. Besides being a close substitute for how many deposit accounts function today, the mutual fund has the additional benefit of satisfying all legal and ethical requirements. Loan and investment contracts (such as money market mutual funds) allow for the “bank” to make use of their clients’ funds while the intents of money owners are clearly classified without running into legal or ethical problems. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Fractional-reserve banking; Maturity mismatching; Fraud; Legal purpose; Deposit; Loans (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (12)

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Working Paper: Oil and Water Do Not Mix, or: Aliud Est Credere, Aliud Deponere (2015)
Working Paper: Oil and water do not mix, or: aliud est credere, aliud deponere (2015)
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DOI: 10.1007/s10551-014-2087-x

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