A Comment on Barnett and Block on Time Deposit and Bagus and Howden on Loan Maturity Mismatching

9 Pages Posted: 30 Jan 2011 Last revised: 15 Mar 2014

See all articles by Nicolas Cachanosky

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research; UCEMA Friedman-Hayek Center for the Study of a Free Society

Date Written: January 18, 2011

Abstract

In Time Deposits, Dimension, and Fraud (2009), William Barnett and Walter Block argue that by borrowing short and lending long there is an over issuance of property rights. Their article, however, does not fully extend the consequences of their contribution. Once this is done, it becomes clearer that their argument suits a great impediment to banking, becoming a possible reason to support rather than to oppose fractional reserve banking. Bagus and Howden (J Bus Ethics 90(3):399-406, 2009) comment on Barnett and Block (J Bus Ethics 88(4):711-716, 2009), the authors claim that while maintaining the illegitimacy of fractional reserve deposits, borrowing short and lending long it is actually not illegitimate. An extension on Bagus and Howden (2009) will show that their line of argumentation can be applied as a defense of fractional reserve banking as well.

Keywords: Time deposit, Fractional reserve banking, 100 percent reserve requirement, Maturity mismatching

JEL Classification: E44, E51, G21

Suggested Citation

Cachanosky, Nicolas, A Comment on Barnett and Block on Time Deposit and Bagus and Howden on Loan Maturity Mismatching (January 18, 2011). Journal of Business Ethics, Vol. 104, No. 2, 2011, Available at SSRN: https://ssrn.com/abstract=1751245

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

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HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

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UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

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