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An Appetite for Yield: The Anatomy of the Subprime Mortgage Crisis

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  • Philip Ashton

    (College of Urban Planning and Public Affairs, University of Illinois-Chicago, 412 S. Peoria, 217 CUPPA Hall (MC 348), Chicago, IL 60607, USA)

Abstract

Whereas policy makers and industry advocates have hailed the growth of the subprime mortgage market in the US as evidence that financial innovation can more efficiently price and absorb credit risk, the 2007 mortgage crisis provides an opportunity to revisit the nature of financial risk. This paper employs a forensic analysis of the development of the subprime market from the 1980s through 2007 to argue that, in a competitive environment marked by the greater integration between housing finance and capital/equity markets, financial innovations provide new opportunities to hedge risk even as they collapse the barriers to rivalries between firms. This has changed the terrain for risk assessment, promoting new modes of financial competition that have intensified systemic risk and extended it to a widening set of firms, households, and communities.

Suggested Citation

  • Philip Ashton, 2009. "An Appetite for Yield: The Anatomy of the Subprime Mortgage Crisis," Environment and Planning A, , vol. 41(6), pages 1420-1441, June.
    • Handle: RePEc:sae:envira:v:41:y:2009:i:6:p:1420-1441
    DOI: 10.1068/a40328
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    References listed on IDEAS

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    2. Souphala Chomsisengphet & Anthony Pennington-Cross, 2006. "The evolution of the subprime mortgage market," Review, Federal Reserve Bank of St. Louis, vol. 88(Jan), pages 31-56.
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    4. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, vol. 2(3), pages 191-309, June.
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    Cited by:

    1. Desiree Fields, 2017. "Unwilling Subjects of Financialization," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 41(4), pages 588-603, July.
    2. Alan Walks, 2014. "Canada's Housing Bubble Story: Mortgage Securitization, the State, and the Global Financial Crisis," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 38(1), pages 256-284, January.
    3. Gary A. Dymski, 2009. "Afterword: Mortgage Markets and the Urban Problematic in the Global Transition," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 33(2), pages 427-442, June.
    4. Manuel B. Aalbers, 2009. "The Sociology and Geography of Mortgage Markets: Reflections on the Financial Crisis," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 33(2), pages 281-290, June.
    5. Rachel Weber, 2010. "Selling City Futures: The Financialization of Urban Redevelopment Policy," Economic Geography, Clark University, vol. 86(3), pages 251-274, July.
    6. Alan Walks, 2014. "From Financialization to Sociospatial Polarization of the City? Evidence from Canada," Economic Geography, Clark University, vol. 90(1), pages 33-66, January.
    7. Leigh Johnson, 2014. "Geographies of Securitized Catastrophe Risk and the Implications of Climate Change," Economic Geography, Clark University, vol. 90(2), pages 155-185, April.

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