Banks and Loan Sales: Marketing Non-Marketable Assets

42 Pages Posted: 27 Apr 2000 Last revised: 16 Sep 2010

See all articles by Gary B. Gorton

Gary B. Gorton

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

George Pennacchi

University of Illinois

Date Written: December 1990

Abstract

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.

Suggested Citation

Gorton, Gary B. and Pennacchi, George G., Banks and Loan Sales: Marketing Non-Marketable Assets (December 1990). NBER Working Paper No. w3551, Available at SSRN: https://ssrn.com/abstract=226833

Gary B. Gorton (Contact Author)

Yale School of Management ( email )

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HOME PAGE: http://mba.yale.edu/faculty/profiles/gorton.shtml

National Bureau of Economic Research (NBER)

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Yale University - Yale Program on Financial Stability

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P.O. Box 208200
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United States

George G. Pennacchi

University of Illinois ( email )

4041 BIF, Box 25
515 East Gregory Drive
Champaign, IL 61820
United States
217-244-0952 (Phone)

HOME PAGE: http://www.business.illinois.edu/gpennacc/

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