Mismatch has led us into trouble many times before

Published in the Financial Times.

Financial events cycle and financial ideas cycle. Here the United Kingdom is again, with real estate generating financial stress. As Patrick Jenkins rightly points out (“Open-ended property funds are accidents waiting to happen,” July 6), this vividly displays “the fundamental mismatch between a highly illiquid asset class and a promise of instant access to your money.”

This same mismatch has led us into trouble many times before. It is why the original U.S. National Banking Act of 1864 prohibited the national banks, as issuers of deposits and currency payable on demand, from making any real estate loans at all. “The property market is already too volatile,” says Mr. Jenkins. Yes, and it always has been.