Accounting for self interest in the credit crisis
Taking as its starting point Alan Greenspan's 'shocked disbelief' in the failure of institutional self interest to prevent the credit crisis, this paper sets out to explore two related questions. How was self interest constructed in financial markets? And how might we account for its failure? Conceptually the paper draws upon Callon's (1998) analysis of 'agent-networks', the importance this gives to the agency of non-humans, and his complementary notions of 'framing'/'disentanglement' and 'overflowing' as these allow and subvert the calculation of self interest. Empirically, the paper then presents a sketch of these processes in the rise and then fall of the market for collateralised debt obligations (CDOs) that was central to the credit crisis. The final substantive section of the paper reflects on the role and 'hyperreal' interaction of accounting and models as 'mediators' in these processes.
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References listed on IDEAS
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- Donald MacKenzie, 2006. "An Engine, Not a Camera: How Financial Models Shape Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262134608, January.
- Miller, Peter & O'Leary, Ted, 2007. "Mediating instruments and making markets: Capital budgeting, science and the economy," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 701-734.
- Macintosh, Norman B. & Shearer, Teri & Thornton, Daniel B. & Welker, Michael, 2000. "Accounting as simulacrum and hyperreality: perspectives on income and capital," Accounting, Organizations and Society, Elsevier, vol. 25(1), pages 13-50, January.
- Donald MacKenzie & Fabian Muniesa & Lucia Siu, 2007. "Introduction to Do Economists Make Markets? On the Performativity of Economics," Introductory Chapters,in: Donald MacKenzie & Fabian Muniesa & Lucia Siu (ed.), Do Economists Make Markets? On the Performativity of Economics Princeton University Press.
- Ingo Fender & John Kiff, 2004. "CDO rating methodology: Some thoughts on model risk and its implications," BIS Working Papers 163, Bank for International Settlements.
- Alan Greenspan, 2005. "Risk transfer and financial stability," Proceedings 968, Federal Reserve Bank of Chicago.
- Geoffrey Whittington, 2008. "Fair Value and the IASB/FASB Conceptual Framework Project: An Alternative View," Abacus, Accounting Foundation, University of Sydney, vol. 44(2), pages 139-168.
- Ashcraft, Adam B. & Schuermann, Til, 2008.
"Understanding the Securitization of Subprime Mortgage Credit,"
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now publishers, vol. 2(3), pages 191-309, June.
- Adam B. Ashcraft & Til Schuermann, 2008. "Understanding the securitization of subprime mortgage credit," Staff Reports 318, Federal Reserve Bank of New York.
- Peter Miller, 1998. "The margins of accounting," European Accounting Review, Taylor & Francis Journals, vol. 7(4), pages 605-621.
- Souphala Chomsisengphet & Anthony Pennington-Cross, 2006. "The evolution of the subprime mortgage market," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 31-56. Full references (including those not matched with items on IDEAS)
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