Banking

The Rise And Fall Of The Nonconventional Mortgage Industry

Date Added: Apr 2010
Format: PDF

The 2007-2009 financial crises were centered on the nonconventional mortgage industry. Scholars have just begun to carefully consider what really caused the crisis. This paper pushes the debate forward in several ways. First, the authors elucidate four different theoretical approaches, "Financialization", "Actor-Network/Performativity", "Perverse Incentives", and "Markets As Politics" to understanding how the mortgage securitization industry evolved. The authors generate hypotheses and relevant data and show that the "Markets As Politics" approach accounts for the social structuring of the market from 1990-2008. Second, the authors use archival and secondary sources to show that the industry became dominated by an "Industrial" conception of control whereby financial firms vertically integrated in order to capture profits at all points in the value chain.