The New Deal and the Origins of the Modern American Real Estate Loan Contract in the Building and Loan Industry

Jonathan Rose and Kenneth Snowden ()

No 12-6, UNCG Economics Working Papers from University of North Carolina at Greensboro, Department of Economics

Abstract: We treat the direct reduction loan contract as an instance of financial innovation and describe its adoption within the building and loan (B&L) industry beginning in the 1880s and culminating in the 1930s. A long chain of complementary innovations at B&Ls gradually reduced the costs of adoption, leading to moderate use by the 1920s and potential for far greater use. In the 1930s, extreme dissatisfaction with other contracts radically altered the adoption calculus, as did new competition from FHA-insured lenders. Federal savings and loan charters built upon the accumulated innovations at B&Ls by emulating the small segment of the industry that had adopted direct reduction lending by the 1920s. Other policies helped restructure the liabilities of B&Ls to accommodate the loss of credit risk sharing and mutuality inherent to older contracts. New Deal policies therefore built upon and facilitated the ongoing process of financial innovation that brought the familiar modern loan contract to the conventional loan market.

Keywords: New Deal; Building and Loan (search for similar items in EconPapers)
JEL-codes: N00 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2012-05-09
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://bryan.uncg.edu/wp-content/uploads/2018/02/12-06.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
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:ris:uncgec:2012_006

Access Statistics for this paper

More papers in UNCG Economics Working Papers from University of North Carolina at Greensboro, Department of Economics UNC Greensboro, Department of Economics, PO Box 26170, Bryan Building 462, Greensboro, NC 27402. Contact information at EDIRC.
Bibliographic data for series maintained by Albert Link ().