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Banking and commerce: a liquidity approach

Joseph Haubrich () and Joao Santos

No 9907, Working Papers (Old Series) 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: Bank liquidity; Nonbank financial institutions (search for similar items in EconPapers)
Date: 1999, Revised 1999
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Journal Article: Banking and commerce: A liquidity approach (2005) Downloads
Working Paper: Banking and commerce: a liquidity approach (1999) Downloads
Working Paper: Banking and Commerce: A Liquidity Approach (1999)
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