Loan sales as a response to market-based capital constraints

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Abstract
A model of bank asset sales in which information asymmetries create the incentive for unregulated banks to originate and sell loans to other banks, rather than fund them with deposit liabilities. Private information implies that bankers can fund local loans only to the extent that their capital can absorb potential losses. Loan sales are effectively a means of employing nonlocal bank capital to support local investments.
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