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The Anatomy of the Mortgage Securitization Crisis

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  • 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
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    References listed on IDEAS

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    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.
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    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. repec:hal:spmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    3. Marion Fourcade & Kieran Healy, 2013. "Classification situations: Life-chances in the neoliberal era," Post-Print hal-03470535, HAL.
    4. 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.
    5. Olivier Godechot, 2019. "Conclusion: What finance manufactures," Post-Print hal-03393812, HAL.
    6. 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.
    7. repec:hal:spmain:info:hdl:2441/6cbt691h0h8o9q5rf0apko0pda is not listed on IDEAS
    8. Olivier Godechot, 2015. "Financialization Is Marketization!," SciencePo Working papers Main hal-03459520, HAL.
    9. 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.
    10. 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.
    11. repec:spo:wpmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    12. repec:spo:wpmain:info:hdl:2441/6cbt691h0h8o9q5rf0apko0pda is not listed on IDEAS
    13. repec:spo:wpmain:info:hdl:2441/4ff88coju39nk8b11b5ghfc1ff is not listed on IDEAS
    14. Godechot, Olivier, 2015. "Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality," MaxPo Discussion Paper Series 15/3, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).
    15. 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.
    16. repec:hal:spmain:info:hdl:2441/4ff88coju39nk8b11b5ghfc1ff is not listed on IDEAS
    17. 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.
    18. 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.
    19. 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.
    20. 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.
    21. 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.
    22. 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.
    23. Fourcade, Marion & Healy, Kieran, 2013. "Classification situations: Life-chances in the neoliberal era," Accounting, Organizations and Society, Elsevier, vol. 38(8), pages 559-572.

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