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Bank Funding Modes

Author

Listed:
  • Stuart I. Greenbaum

    (Washington University in St. Louis)

  • Anjan V. Thakor

    (Washington University in St. Louis)

Abstract

We examine a bank's choice of whether to fund the loans it originates by emitting deposits or to sell the loans to investors. With common knowledge of loan quality and laissez faire banking, we find that the choice is irrelevant. With asymmetric information but without government intervention, we find that better quality assets will be sold (securitized) and poorer quality assets will be funded with deposits. Public regulation can influence the bank's choice; subsidies can cause a bank to favor deposit funding, but mutual funds and third-party insurers may mitigate the effects of governmental subsidies.

Suggested Citation

  • Stuart I. Greenbaum & Anjan V. Thakor, 2004. "Bank Funding Modes," Finance 0411052, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0411052
    Note: Type of Document - pdf; pages: 23
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0411/0411052.pdf
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    References listed on IDEAS

    as
    1. Taggart, Robert A, Jr & Greenbaum, Stuart I, 1978. "Bank Capital and Public Regulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(2), pages 158-169, May.
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    JEL classification:

    • G - Financial Economics

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