No abstract

No abstract

Law School. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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.

No abstract