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The Evolving Loan Sales Market

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Nearly everyone, from daily readers of the American Banker to devotees of It's a Wonderful Life or Bonnie and Clyde, somehow learns a few basic facts about banking. Most people know that a bank accepts deposits and uses the money to make loans. Many people believe that if too many depositors want their money back at once, the bank will fail. What would people think if they knew banks could make loans without taking in deposits, and sell loans when depositors want their money returned?

Nearly everyone, from daily readers of the American Banker to devotees of It's a Wonderful Life or Bonnie and Clyde, somehow learns a few basic facts about banking. Most people know that a bank accepts deposits and uses the money to make loans. Many people believe that if too many depositors want their money back at once, the bank will fail. What would people think if they knew banks could make loans without taking in deposits, and sell loans when depositors want their money returned?


Suggested citation: Haubrich, Joseph G., 1993. "The Evolving Loan Sales Market," Federal Reserve Bank of Cleveland, Economic Commentary, 07.15.1993.

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