NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Lending to Lemons: Landschafts-Credit in 18th Century Prussia

Kirsten Wandschneider

NBER Working Paper No. 19159
Issued in June 2013
NBER Program(s):   ME

The following paper describes the emergence of cooperative mortgage credit associations, called "Landschaften" in 18th century Prussia, and thereby tells the history of mortgage-covered bonds. Landschaften facilitated the refinancing of loans for Prussian estates by issuing covered bonds (Pfandbriefe) that were jointly backed by their members. They relied on dual recourse, cooperative structure, joint liability, and local administration to overcome asymmetric information problems related to lending. Their emergence serves as an example for financial innovation in historical mortgage markets. Pfandbriefe exist to this day and are known for their security. Their success goes back to some of the historical features.

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Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19159

Forthcoming: Lending to Lemons: Landschafts-Credit in 18th Century Prussia, Kirsten Wandschneider. in Housing and Mortgage Markets in Historical Perspective, White, Snowden, and Fishback. 2014

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