Abstract
Dutch-Caribbean plantations attracted substantial outside funding in the 1760s. This came to an abrupt end after the 1773 credit crisis. We use one banker’s detailed archives to analyze how bankers and investors were initially able to overcome asymmetric information problems, and why the system eventually broke down. Bankers oversaw plantations’ cash flows and placed debt with investors in the form of mortgage-backed securities. Strong growth led to lax screening and an oversupply of credit. After a fall in commodity prices, plantation debts were unsustainable. Restructurings were incomplete and debt overhang led to underinvestment and a drop in economic activity.
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