Abstract
Before the 1930s Building and Loan Associations (B&Ls) were the leading residential mortgage leaders in the U.S. When severely distressed during the housing crisis of the 1930s, B&Ls frequently took years to liquidate. These delays in resolution resulted from the unique B&L contract that encouraged borrowing members to prolong dissolution and gave them shared control over the timing of liquidation. We estimate a hazard model of dissolution using a new dataset of New Jersey B&Ls and find that the probability of liquidation rose 37% when the share of non-borrowing members rose above two-thirds. The severe restriction on liquidity suffered by non-borrowers was instrumental to the rapid transition from the traditional B&L to the modern Savings & Loan industry during the 1930s housing crisis.
Original language | English (US) |
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Pages (from-to) | 28-44 |
Number of pages | 17 |
Journal | Journal of Financial Intermediation |
Volume | 36 |
DOIs | |
State | Published - Oct 2018 |
Keywords
- Great Depression
- Housing crisis
- Mortgage
- Savings and loan
ASJC Scopus subject areas
- Finance
- Economics and Econometrics