Borrowing Alone The Theory and Policy Implications of the Commodification of Finance

Greg Hannsgen

Finance from University Library of Munich, Germany

Abstract: Over the past 20 years, finance has become commodified. Firms increasingly obtain finance from securities markets, instead of borrowing from commercial banks with which they have long-term relationships, while Fannie Mae and Freddie Mac package a growing number of mortgages into bonds. When loans are priced by impersonal markets rather than by individual bankers, they become more like commodities. As in many cases when goods are commodified, this trend has important policy implications. This paper describes new Keynesian and social economics perspectives on the difference between traditional and securitized loans, and points out weaknesses in their account of the significance of banking relationships. A social theory of banking, and, particularly, of risk perception, is then developed. Finally, the policy implications of the commodification of finance are examined in light of the social theory.

Keywords: trust; securitization; banks; social economics; discrimination; social networks (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Date: 2004-02-10
New Economics Papers: this item is included in nep-cfn and nep-his
Note: Type of Document - pdf; to print on 23
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Citations: View citations in EconPapers (3)

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Working Paper: Borrowing Alone: The Theory and Policy Implications of the Commodification of Finance (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0402011

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