NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Banks and Loan Sales: Marketing Non-Marketable Assets

Gary Gorton, George Pennacchi

NBER Working Paper No. 3551
Issued in December 1990
NBER Program(s):   ME

A defining characteristic of bank loans is that they are not resold once created. Yet, in 1989 about $240 billion of commercial and industrial loans were sold, compared to trivial amounts five years earlier. Selling loans without explicit guarantee or recourse is inconsistent with theories of the existence of financial intermediation. What has changed to make bank loans marketable? In this paper we test for the presence of implicit contractual features of bank loan sales contracts that could explain this inconsistency. In addition, the effect of technological progress on the reduction of information asymmetries between loan buyers and loan sellers is considered. The paper tests for the presence of these features and effects using a sample of over 800 recent loan sales.

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Document Object Identifier (DOI): 10.3386/w3551

Published: Journal of Monetary Economics, Vol. 35, no. 3 (1995): 389-411.

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