IDEAS home Printed from https://ideas.repec.org/p/cdl/indrel/qt9bh786v2.html
   My bibliography  Save this paper

The Anatomy of the Mortgage Securitization Crisis

Author

Listed:
  • Fligstein, Neil
  • Goldstein, Adam

Abstract

The current crisis in the mortgage securitization industry highlights significant failures in our models of how markets work and our political will, organizational capability, and ideological desire to intervene in markets. This paper shows that one of the main sources of failure has been the lack of a coherent understanding of how these markets came into existence, how tactics and strategies of the principal firms in these markets have evolved over time, and how we ended up with the economic collapse of the main firms. It seeks to provide some insight into these processes by compiling both historical and quantitative data on the emergence and spread of these tactics across the largest investment banks and their principal competitors from the mortgage origination industry. It ends by offering some policy proscriptions based on the analysis.

Suggested Citation

  • Fligstein, Neil & Goldstein, Adam, 2010. "The Anatomy of the Mortgage Securitization Crisis," Institute for Research on Labor and Employment, Working Paper Series qt9bh786v2, Institute of Industrial Relations, UC Berkeley.
    • Handle: RePEc:cdl:indrel:qt9bh786v2
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/9bh786v2.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 307-362.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Botzem, Sebastian & Dobusch, Leonhard, 2017. "Financialization as strategy: Accounting for inter-organizational value creation in the European real estate industry," Accounting, Organizations and Society, Elsevier, vol. 59(C), pages 31-43.
    2. Olivier Godechot, 2015. "Financialization Is Marketization!," Working Papers hal-03459520, HAL.
    3. repec:hal:spmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    4. repec:hal:spmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    5. Olivier Godechot, 2015. "Financialization Is Marketization! : A Study on the Respective Impact of Various Dimensions of Financialization on the Increase in Global Inequality," Sciences Po publications 15/3, Sciences Po.
    6. Sascha Tobias Wengerek & Benjamin Hippert & André Uhde, 2019. "Risk allocation through securitization - Evidence from non-performing loans," Working Papers Dissertations 58, Paderborn University, Faculty of Business Administration and Economics.
    7. Olivier Godechot, 2019. "Conclusion: What finance manufactures," Post-Print hal-03393812, HAL.
    8. Darr, Asaf, 2015. "Note from the editor: Economy and democracy," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 16(3), pages 2-3.
    9. Marion Fourcade & Kieran Healy, 2013. "Classification situations: Life-chances in the neoliberal era," Post-Print hal-03470535, HAL.
    10. Bozanic, Zahn & Dirsmith, Mark W. & Huddart, Steven, 2012. "The social constitution of regulation: The endogenization of insider trading laws," Accounting, Organizations and Society, Elsevier, vol. 37(7), pages 461-481.
    11. Fligstein, Neil & Goldstein, Adam, 2011. "Catalyst of Disaster: Subprime Mortgage Securitization and the Roots of the Great Recession," Institute for Research on Labor and Employment, Working Paper Series qt83x2h03n, Institute of Industrial Relations, UC Berkeley.
    12. Georg Rilinger, 2023. "Who captures whom? Regulatory misperceptions and the timing of cognitive capture," Regulation & Governance, John Wiley & Sons, vol. 17(1), pages 43-60, January.
    13. Erik Larson, 2017. "Demand for credit, international financial legitimacy, and vulnerability to crises: Regulatory change and the social origins of Iceland's collapse," Regulation & Governance, John Wiley & Sons, vol. 11(2), pages 185-202, June.
    14. Olivier Godechot, 2015. "Financialization Is Marketization!," SciencePo Working papers Main hal-03459520, HAL.
    15. Ossandón, José, 2012. "Destapando la Caja Negra: Sociologías de los Créditos de Consumo en Chile [Opening up the black box: sociologies of consumer credits in Chile]," MPRA Paper 42181, University Library of Munich, Germany.
    16. Olivier Godechot, 2019. "Conclusion: What finance manufactures," SciencePo Working papers Main hal-03393812, HAL.
    17. Fligstein, Neil & Goldstein, Adam, 2012. "Sucker Punched by the Invisible Hand," Institute for Research on Labor and Employment, Working Paper Series qt1754s7tz, Institute of Industrial Relations, UC Berkeley.
    18. Herzig, Christian & Moon, Jeremy, 2013. "Discourses on corporate social ir/responsibility in the financial sector," Journal of Business Research, Elsevier, vol. 66(10), pages 1870-1880.
    19. David Lagziel & Ehud Lehrer, 2021. "Transferable deposits as a screening mechanism," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(2), pages 483-504, March.
    20. repec:hal:spmain:info:hdl:2441/6cbt691h0h8o9q5rf0apko0pda is not listed on IDEAS
    21. repec:hal:spmain:info:hdl:2441/4ff88coju39nk8b11b5ghfc1ff is not listed on IDEAS
    22. Fourcade, Marion & Healy, Kieran, 2013. "Classification situations: Life-chances in the neoliberal era," Accounting, Organizations and Society, Elsevier, vol. 38(8), pages 559-572.
    23. Lounsbury, Michael & Tavakoly, Pooya, 2013. "Stock markets on trial: Towards an understanding of great recession consequences," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 14(3), pages 4-13.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
    2. Mikel Bedayo & Gabriel Jiménez & José-Luis Peydró & Raquel Vegas, 2020. "Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures," Working Papers 1215, Barcelona School of Economics.
    3. Arnold, M., 2017. "The impact of central clearing on banks’ lending discipline," Journal of Financial Markets, Elsevier, vol. 36(C), pages 91-114.
    4. Deniz Igan & Prachi Mishra & Thierry Tressel, 2012. "A Fistful of Dollars: Lobbying and the Financial Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 195-230.
    5. Christopher Mayer & Edward Morrison & Tomasz Piskorski & Arpit Gupta, 2014. "Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide," American Economic Review, American Economic Association, vol. 104(9), pages 2830-2857, September.
    6. Delis, Manthos D. & Hasan, Iftekhar & Tsionas, Efthymios G., 2015. "Firms' risk endogenous to strategic management choices," Bank of Finland Research Discussion Papers 16/2015, Bank of Finland.
    7. repec:zbw:bofrdp:2018_017 is not listed on IDEAS
    8. Agarwal, Sumit & Amromin, Gene & Ben-David, Itzhak & Chomsisengphet, Souphala & Evanoff, Douglas D., 2014. "Predatory lending and the subprime crisis," Journal of Financial Economics, Elsevier, vol. 113(1), pages 29-52.
    9. Vladimir Asriyan & Victoria Vanasco, 2019. "Security Design in Non-Exclusive Markets with Asymmetric Information," Working Papers 1164, Barcelona School of Economics.
    10. G. Peersman & W. Wagner, 2014. "Shocks to Bank Lending, Risk-Taking, Securitization, and their Role for U.S. Business Cycle Fluctuations," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/874, Ghent University, Faculty of Economics and Business Administration.
    11. Sumit Agarwal & Souphala Chomsisengphet & Neale Mahoney & Strö & Johannes bel, 2015. "Do Banks Pass Through Credit Expansions? The Marginal Profitability of Consumer Lending During the Great Recession," CESifo Working Paper Series 5521, CESifo.
    12. Pagès, Henri, 2013. "Bank monitoring incentives and optimal ABS," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 30-54.
    13. Berentsen, Aleksander & McBride, Michael & Rocheteau, Guillaume, 2017. "Limelight on dark markets: Theory and experimental evidence on liquidity and information," Journal of Economic Dynamics and Control, Elsevier, vol. 75(C), pages 70-90.
    14. Ozlem Akin & José Montalvo & Jaume García Villar & José-Luis Peydró & Josep Raya, 2014. "The real estate and credit bubble: evidence from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(2), pages 223-243, August.
    15. Bubb, Ryan & Kaufman, Alex, 2014. "Securitization and moral hazard: Evidence from credit score cutoff rules," Journal of Monetary Economics, Elsevier, vol. 63(C), pages 1-18.
    16. Moral-Benito, Enrique & Roehn, Oliver, 2016. "The impact of financial regulation on current account balances," European Economic Review, Elsevier, vol. 81(C), pages 148-166.
    17. Jan Kakes & Rob Nijskens, 2018. "Size of the banking sector: implications for financial stability," DNB Occasional Studies 1606, Netherlands Central Bank, Research Department.
    18. Ryan Bubb & Alex Kaufman, 2011. "Securitization and moral hazard: evidence from credit score cutoff rules," Public Policy Discussion Paper 11-6, Federal Reserve Bank of Boston.
    19. Schich, Sebastian T., 2009. "Challenges Associated with the Expansion of Deposit Insurance Coverage during Fall 2008," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-23.
    20. Bo Liu & James D. Shilling & Tien Foo Sing, 2020. "Large Banks and Efficient Banks: how Do they Influence Credit Supply and Default Risk?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 57(1), pages 1-28, February.
    21. Kim, Teakdong & Koo, Bonwoo & Park, Minsoo, 2013. "Role of financial regulation and innovation in the financial crisis," Journal of Financial Stability, Elsevier, vol. 9(4), pages 662-672.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:indrel:qt9bh786v2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/irucbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.