The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown
AbstractThe 2007-2009 financial crisis was centered on the mortgage industry. This paper develops a distinctly sociological explanation of that crisis based on Fligsteinâ€™s (1996) markets as politics approach and the sociology of finance. We use archival and secondary sources to show that the industry became dominated by an â€œindustrialâ€ conception of control whereby financial firms vertically integrated in order to capture profits in all phases of the mortgage industry including the production of financial products. The results of multivariate regression analyses show that the â€œindustrialâ€ model drove the deterioration in the quality of securities that firms issued and significantly contributed to the eventual failure of the firms that pursued the strategy. We show that large global banks which were more involved in the industrial production of U.S. mortgage securities also experienced greater investment losses. The findings challenge existing conventional accounts of the crisis and provide important theoretical linkages to the sociology of finance
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Bibliographic InfoPaper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt2zx8r7fb.
Date of creation: 01 Oct 2012
Date of revision:
Social and Behavioral Sciences; Mortgage Finance; Mortgage Meltdown;
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