NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Banks as Secret Keepers

Tri Vi Dang, Gary Gorton, Bengt Holmström, Guillermo Ordonez

NBER Working Paper No. 20255
Issued in June 2014
NBER Program(s):   CF   EFG   ME

Banks are optimally opaque institutions. They produce debt for use as a transaction medium (bank money), which requires that information about the backing assets – loans – not be revealed, so that bank money does not fluctuate in value, reducing the efficiency of trade. This need for opacity conflicts with the production of information about investment projects, needed for allocative efficiency. Intermediaries exist to hide such information, so banks select portfolios of information-insensitive assets. For the economy as a whole, firms endogenously separate into bank finance and capital market/stock market finance depending on the cost of producing information about their projects.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20255

Users who downloaded this paper also downloaded these:
Benmelech, Bergman, Milanez, and Mukharlyamov w20254 The Agglomeration of Bankruptcy
Bianchi and Melosi w20238 Escaping the Great Recession
Hart and Zingales w20207 Banks Are Where The Liquidity Is
Wu and Xia w20117 Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound
Imbens w19959 Matching Methods in Practice: Three Examples
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us