Banks have played a distinctive role in the financial system. In a forthcoming Journal of Finance paper by Finance Professor Amar Gande and co-author Anthony Saunders, the nature of banks’ special role is analyzed given a burgeoning secondary market for bank debt. The secondary market for loans is now almost as large as the bond market. The secondary loan market even proved resilient during the recent financial crisis, in contrast to the dramatic decline occurred in structured finance products.
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