What forces might tend to equalize rates

Reference no: EM13304278

Suppose interest rates on residential mortgages of equal risk were 7 percent in California and 9 percent in New York. Could this differential persist? What forces might tend to equalize rates?

Would differentials in borrowing costs for businesses of equal risk located in California and New York be more or less likely to exist than differentials in residential mortgage rates? Would differentials in the cost of money for New York and California firms be more likely to exist if the firms being compared were very large or if they were very small? What are the implications of all this for the pressure now being put on Congress to permit banks to engage in nationwide branching?

Reference no: EM13304278

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