Oil and water do not mix, or: aliud est credere, aliud deponere

Philipp Bagus, David Howden and Amadeus Gabriel

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Fractional-reserve banking; Maturity mismatching; Fraud; Legal purpose; Deposit; Loans (search for similar items in EconPapers)
JEL-codes: G0 G00 K1 K12 K22 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Journal of Business Ethics 128.1(2015): pp. 197-206

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/79789/1/MPRA_paper_79789.pdf original version (application/pdf)

Related works:
Journal Article: 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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79789

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().