Dutch securities for American land speculation in the late-eighteenth century

R.G.P. Frehen, W. Goetzmann, K.G. Rouwenhorst

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review

Abstract

The end of the 18th century was one of the most innovative periods in the history of securitization. Public markets for mortgage-backed securities are among the most interesting developments of the period. In The Netherlands, a network of merchant investment bankers used sophisticated methods for structuring loans based on overseas properties as collateral. In 1793, the Holland Land Company issued two structured notes to purchase millions of acres in Western New York. In 1794, the purchase and development of property in the newly-designated capital city of Washington D.C. was financed by mortgage-backed bonds underwritten by Dutch merchants. These securities raise questions about why investors trusted in the value of overseas property as collateral, and whether the expected rates of return on the instruments were commensurate with their risk. In our analysis, we address these questions by exploring how the early mortgage-backed securities were based on earlier collateralized fixed income instruments in the Dutch market, as well as other 18th century experiments with securitization and collateralization of land. We argue that these innovative securities resulted from an institutional framework that easily accommodated novel fixed income issues, and came on the heels of large gains to market speculation in American debt.
Original languageEnglish
Title of host publicationHousing and Mortgage Markets in Historical Perspective
EditorsE.N. White, K. Snowden, P. Fishback
Place of PublicationChicago
PublisherUniversity of Chicago Press
Pages287-304
ISBN (Print)9780226073842
Publication statusPublished - Jul 2014

Fingerprint

Speculation
18th century
Merchants
Securitization
Mortgage-backed securities
Purchase
Fixed income
Loans
Institutional framework
Investors
Debt
Experiment
Bankers
Rate of return
Mortgages
The Netherlands

Cite this

Frehen, R. G. P., Goetzmann, W., & Rouwenhorst, K. G. (2014). Dutch securities for American land speculation in the late-eighteenth century. In E. N. White, K. Snowden, & P. Fishback (Eds.), Housing and Mortgage Markets in Historical Perspective (pp. 287-304). Chicago: University of Chicago Press.
Frehen, R.G.P. ; Goetzmann, W. ; Rouwenhorst, K.G. / Dutch securities for American land speculation in the late-eighteenth century. Housing and Mortgage Markets in Historical Perspective. editor / E.N. White ; K. Snowden ; P. Fishback. Chicago : University of Chicago Press, 2014. pp. 287-304
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Frehen, RGP, Goetzmann, W & Rouwenhorst, KG 2014, Dutch securities for American land speculation in the late-eighteenth century. in EN White, K Snowden & P Fishback (eds), Housing and Mortgage Markets in Historical Perspective. University of Chicago Press, Chicago, pp. 287-304.

Dutch securities for American land speculation in the late-eighteenth century. / Frehen, R.G.P.; Goetzmann, W.; Rouwenhorst, K.G.

Housing and Mortgage Markets in Historical Perspective. ed. / E.N. White; K. Snowden; P. Fishback. Chicago : University of Chicago Press, 2014. p. 287-304.

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review

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Frehen RGP, Goetzmann W, Rouwenhorst KG. Dutch securities for American land speculation in the late-eighteenth century. In White EN, Snowden K, Fishback P, editors, Housing and Mortgage Markets in Historical Perspective. Chicago: University of Chicago Press. 2014. p. 287-304