11/30 David Bholat, ‘Why British Banks entered the Mortgage Market’
Tuesday, November 16, 2010; Cobb Hall Room 403
David’s talk will focus on the multiple factors that lead British banks to start making residential mortgage loans for the first time in a significant way in the early 1980s. Hope to see you next Tuesday!
Abstract: This short article places British banks’ involvement in mortgage finance in historical perspective. In particular, I investigate the (1) structural (2) contextually contingent and (3) firm-level factors that contributed to the entrance of British banks into the residential mortgage market on an amplified scale in the early 1980s. I argue that the deregulation of capital flows set in train a deregulatory spiral with unintended consequences. Capital liberalization disrupted quantitative restrictions on bank lending, thus making possible the expansion of bank loans on real estate. This destroyed the building societies’ cartel and compelled them to advocate for the deregulation of their business in order to remain competitive. The concluding irony is that these deregulatory efforts to save building societies contributed to their diminution and secured instead the recent hegemony of banks in residential mortgage finance.