Structuring the global market for mortgage-backed securities
This project looks at the development of the market for mortgage-backed securities in the United States and Europe in the years leading up to the 2008 financial crisis. The goal of this project is to understand the role of mortgage securitization in the 2008 financial crisis and to explain why financial institutions embraced the production and sale of mortgage-backed securities and their derivatives on such an enormous scale during the first decade of the twenty-first century.
Two papers written with Neil Fligstein consider how the crisis spread across the developed world. Using country and bank-level data, we show that the participation of banks in the global market for U.S. subprime mortgage-backed securities was a key channel for the initial spread of the financial crisis across the developed world in the fall of 2008. Banking crises occurred in countries where banks had purchased U.S. subprime mortgage-backed securities and used them to back other, more exotic financial derivatives. These papers have been published in the Socio-Economic Review and the Routledge Companion to Banking Regulation and Reform.
The results of the first papers beg the question of why firms chose to embrace subprime mortgage securitization in the first place, an activity once confined to the most marginal financial actors. In two follow-up papers, I use transaction-level data to consider examine how relations of cooperation and competition within domestic banking sectors help explain the adoption of subprime mortgage securitization in the United States and Spain, both countries where securitization fueled disastrous real estate bubbles in the early twenty-first century. Using a quasi-spatial model that analyses degrees of alignment between firm strategies, the first paper shows how the deregulation of the U.S. banking sector and the explosive growth of firms like Countrywide led U.S. firms to reorient their activities towards the production of subprime mortgage-backed securities, even as the subprime market neared collapse. In Spain, however, it appears that the adoption of mortgage securitization was instead shaped by patterns of interfirm influence and cooperation laid down at the birth of domestic securities industry in the nineteen-nineties.
Neil Fligstein and Jacob Habinek. 2014. “Sucker Punched by the Invisible Hand: the World Financial Markets and the Globalization of the U.S. Mortgage Crisis.” Socio-Economic Review 12 (4): 637-665.
Neil Fligstein and Jacob Habinek. 2016. “How the American Financial Meltdown of 2008 Caused the Global Financial Crisis.” In Ertürk, Ismail, and Daniela Gabor, eds., The Routledge Companion to Banking Regulation and Reform. London: Routledge.
Jacob Habinek, Adam Goldstein, and Neil Fligstein. “The Structure and Transformation of Organizational Fields: Subprime Mortgage Finance, 1993-2008.” In preparation.
Tod van Gunten and Jacob Habinek. "The Diffusion of Financial Exuberence: Securitization in the Spanish Banking Sector." In preparation.
Two papers written with Neil Fligstein consider how the crisis spread across the developed world. Using country and bank-level data, we show that the participation of banks in the global market for U.S. subprime mortgage-backed securities was a key channel for the initial spread of the financial crisis across the developed world in the fall of 2008. Banking crises occurred in countries where banks had purchased U.S. subprime mortgage-backed securities and used them to back other, more exotic financial derivatives. These papers have been published in the Socio-Economic Review and the Routledge Companion to Banking Regulation and Reform.
The results of the first papers beg the question of why firms chose to embrace subprime mortgage securitization in the first place, an activity once confined to the most marginal financial actors. In two follow-up papers, I use transaction-level data to consider examine how relations of cooperation and competition within domestic banking sectors help explain the adoption of subprime mortgage securitization in the United States and Spain, both countries where securitization fueled disastrous real estate bubbles in the early twenty-first century. Using a quasi-spatial model that analyses degrees of alignment between firm strategies, the first paper shows how the deregulation of the U.S. banking sector and the explosive growth of firms like Countrywide led U.S. firms to reorient their activities towards the production of subprime mortgage-backed securities, even as the subprime market neared collapse. In Spain, however, it appears that the adoption of mortgage securitization was instead shaped by patterns of interfirm influence and cooperation laid down at the birth of domestic securities industry in the nineteen-nineties.
Neil Fligstein and Jacob Habinek. 2014. “Sucker Punched by the Invisible Hand: the World Financial Markets and the Globalization of the U.S. Mortgage Crisis.” Socio-Economic Review 12 (4): 637-665.
Neil Fligstein and Jacob Habinek. 2016. “How the American Financial Meltdown of 2008 Caused the Global Financial Crisis.” In Ertürk, Ismail, and Daniela Gabor, eds., The Routledge Companion to Banking Regulation and Reform. London: Routledge.
Jacob Habinek, Adam Goldstein, and Neil Fligstein. “The Structure and Transformation of Organizational Fields: Subprime Mortgage Finance, 1993-2008.” In preparation.
Tod van Gunten and Jacob Habinek. "The Diffusion of Financial Exuberence: Securitization in the Spanish Banking Sector." In preparation.