Since many investors in the modern world are seriously circumscribed in their actions, there is an opportunity to increase the total investment value of an enterprise by effective bond financing. Economic theorists are fond of saying that in a perfectly fluid world one function of the market is to equalize risks on all investments. If the yield differential between two securities should be greater than the apparent risk differential, arbitragers would rush into the breach and promptly restore the yield differential to its proper value. But in our world, arbitragers may have insufficient funds to do their job because so many investors are deterred from buying stocks or low-grade bonds, either by law, by personal circumstance, by income taxes, or even by pure prejudice. These restricted investors, including all banks and insurance companies, have to bid for high-grade investments almost without regard to yield differentials or the attractiveness of the lower grade investments. And these restricted investors have sufficient funds to maintain yield differentials well above risk differentials. The result is a sort of super premium for safety; and a corporation management can take advantage of this super premium by issuing as many bonds as it can maintain at a high rating grade.

Donald MacKenzie, An Engine, Not a Camera, loc. 191