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Essay / Research Paper Abstract
This 3 page paper looks at the practice of insider lending during the nineteenth century, what it was, the purpose it served and why it had to change. The bibliography cites 1 source.
Page Count:
3 pages (~225 words per page)
File: TS14_TE19bank.rtf
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Unformatted sample text from the term paper:
practice which was seen in the past was that of insider lending. This was when lending would take place with the loan granted to an individual who was inside the
bank, in effect this was connected lending. Today this may be seen as controversial. With arguments over the way in which this could be open to abuse, lead to a
conflict of interests and result in unwise lending decisions. However, the nineteenth century was a different environment. Loans given to those connected with the bank were common place. Insider
loans were not only a way of lending money, but can also be seen as a key way in which banks developed, gaining the loan business and also the support
of local businesses. In most cases the loans would be given to one of only a few concentrated important individual, such as investors or local businessmen who had an
interest in the bank. These men are also those that would have local interests in other businesses, as such the lending of funds could be seen to benefit the community,
as well as benefit the bank. The way in which loans was granted was also different. Todays technology for credit scoring was not available, and the decision was one which
was reached by consensus, with the use of a lending committee. It can be argued that the lending committee was the tool which enabled insider lending to take place,
a this placed a more subjective measure on proposals and also prevented loans being made where they may be for private gain with a high social cost where there were
more members on the committee, lending decisions by smaller committees had the potential to be more questionable (Lamoreaux, 1994). Therefore the committee provided a control, It is also possible to
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