Mortgage Finance (The 1970s): Inflation, Stagflation, and Disintermediation

thedailybeast

A bank holds a loan in its asset portfolio and funds it with low-cost deposits (also known as “portfolio” or “spread” lending). Holding loans in portfolio and funding them with low-cost deposits, works as long as interest rates were stable, and there was a readily available supply of deposits. This model broke down in the 1970s when market interest rates soared…