【Talk & Lecture】 The Banks Did It: An Anatomy of the Financial Crisis
Date: Nov 9, 2021
Time: 9:00-10:30
Speaker: Neil Fligstein
Link: https://owl.h5.xeknow.com/s/2xBsXt
Neil Fligstein is the Class of 1939 Chancellor’s Professor in the Department of Sociology at the University of California, Berkeley. He has made research contributions to the fields of economic sociology, organizational theory, and social stratification. He is the author of eight books including The Transformation of Corporate Control (Harvard University Press, 1993), The Architecture of Markets (Princeton University Press 2001), Euroclash (Oxford University Press, 2008), and A Theory of Fields (with Doug McAdam, Oxford University Press, 2012). He has recently published The Banks Did it: An Anatomy of the Financial Crisis.
【Abstract】
More than a decade after the 2008 financial crisis plunged the world economy into recession, we still lack an adequate explanation for why it happened. Existing accounts identify a number of culprits-- financial instruments, traders, regulators, capital flows-- yet fail to grasp how the various puzzle pieces came together. The key is understanding what the banks were doing. There was a convergence of major U.S. banks on an identical business model: the vertical integration of originating and securitizing mortgages in order to maximize the extraction of profit from the securitization of mortgages. In my talk, I discuss how all of the major U.S. banks and many European banks became dependent on mortgage securitization. Each firm originated mortgages, issued mortgage backed securities, sold those securities, and in many cases acted as their own best customer by purchasing the same securities. Entirely reliant on the throughput of mortgages, these firms were unable to alter course when it became clear that the mortgage origination market had turned on them in 2006. With the structural features of the banking industry in view, the rest of the story falls into place. I explain how the crisis was produced and why it spread so fast and so deeply. The banks dependence on mortgage securitization also explains why they engaged in predatory lending and securities fraud in order to keep their vertically integrated securitization machinery in operation. I describe why the regulators missed what was happening. I end by discussing how next time it really could be different.
