The Hubris of Hybrids

In the pages of this journal, a fruitful debate has evolved on the ethical legitimacy of fractional-reserve banking. In this article, we respond to the new arguments raised by Evans (J Bus Ethics, 2014) as we clarify our (Bagus et al. in J Bus Ethics 128:197–206, 2015a) position on the unethical and...

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Bibliographic Details
Authors: Bagus, Philipp (Author) ; Howden, David (Author) ; Gabriel, Amadeus (Author)
Format: Electronic Article
Language:English
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Published: Springer 2017
In: Journal of business ethics
Year: 2017, Volume: 145, Issue: 2, Pages: 373-382
Further subjects:B Banking
B 100 % reserve requirement
B Fractional-reserve banking
B Demand deposits
B Fraud
Online Access: Volltext (JSTOR)
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Summary:In the pages of this journal, a fruitful debate has evolved on the ethical legitimacy of fractional-reserve banking. In this article, we respond to the new arguments raised by Evans (J Bus Ethics, 2014) as we clarify our (Bagus et al. in J Bus Ethics 128:197–206, 2015a) position on the unethical and illegitimate nature of fractional-reserve banking. Fractional-reserve banking is not a recent financial innovation (unlike, e.g., money market mutual funds) but represents a long-standing legal aberration. The co-mingling of two mutually exclusive financial contracts, deposit and loan, confounds the contracting parties’ purposes, intents, rights, and obligations. As a result, it creates unsolvable legal difficulties and ethical dilemmas. While these problems are most evident in the case of a bank run, they also arise when trying to answer the simple question of “who owns a deposit?”
ISSN:1573-0697
Contains:Enthalten in: Journal of business ethics
Persistent identifiers:DOI: 10.1007/s10551-015-2884-x