CEU eTD Collection The Makings of a Crisis: An Inquiry into the Role of the State in the Sub Prime Mortgage In partial fulfillment of the degree for Masters of Arts Department of Sociology and Social Anthropology Social and Sociology of Department Professor Alexandra Kowalski Central European University Central European Professor Balazs Vedres Balazs Professor Jonathan McCombs Jonathan Budapest, Hungary Budapest, Submitted to Submitted Supervisors: Crisis 2011 By CEU eTD Collection writing process supervisor, Alexandra Kowalski. Iam deeply indebtedthankful, and toher efforts during the possible. This thesis would not be possible without aidthe and guidance of my primary andefforts patience during process.Withouther this support, wouldthis certainly not be of fresh air in between sentences. Iwould also like to thank my partner, Amanda June, for her Tsybulnyk, whoendured this grueling with process me, deserves mention for littlethe breathes Tetiana Also, encouragement. and love of fountain ending a never provided who parents, Rooney also deserves for mention his diligence andsupport.Ialso extendmy thanks tomy failedask questionsnever insightsTom toandcritical arepresenttough whose throughout. First and foremost, I would also like to thank my secondary supervisor, Balazs Vedres, who housingthe bubble. created justifications, different network of social relations between state and market actors, working toward the same end with forincreased homeownership among lower-class residents. The thesis implies that a closed governmentality marketembodied practice. argue that aneo-liberal Sub-Prime the and I Mortgage state of where andHousing Development, acorrelationis Urban drawnbetween goals ofmarketthe are Thesefeatures then with brief compared a policy Department published by theUnited States’ industry and newspaper articles, detailing the implicitassociations as key features. discursive eighty on based anarrative constructs thesis the approach, actor-network an Using structure. It then recounts Sub-Primethe market Mortgage from its beginnings, giving its an overview of beginning with the Great Depression with emphasizing the role of the state in theirfunctionality. role in spawning currentthe financial crisis. Itoutlines a brief history financialof markets The thesis considers the role of state in the creation of the Sub-Prime Mortgage Bubble and its , where a market solution was created to meet a perceived social need: the need the need: to meeta perceivedsocial was created solution market , wherea Acknowledgements Abstract ii CEU eTD Collection eerhMtra ...... 54 Research Material Works Cited...... 47 Chapter Six: Concluding Remarks...... 45 Chapter Five: Analysis and Discussion...... 40 Chapter Four: Methodology and the ...... 23 Sub-Prime Narrative Chapter Three: Theorizing Financial Markets...... 15 Crisis..4 Mortgage Prime the Sub to Depression the Great – From Considerations Two: Historical Chapter Chapter One: Introduction...... 1 ...... ii Abstract Table of Contents iii CEU eTD Collection such, the marketsuch, the has seen years recession a major roughly every sincethe1980s:Savingsten allowing Asitsmarketsurge andbeen ‘natural’ order. to recedeaccording the to deregulated werenothere major financial downturns during period. this Since then, global the economy has seemed to work for the years following World War II until its dissolution in the early 1970s as System, which sought tocontrol speculation and prevent another Great Depression. The system Woods known as Bretton the framework, regulatory state financial saw of a global erection II the Loan Crisis, and the Great Depression) involve speculation on real estate. The end of World War beginning with the Great Depression: three of which (Sub-Prime Mortgage Crisis, Savings and of catastrophe. for aclimate themakings insteadbut will analyze on what causedthefinancial debate crisis, the veil of expertise hiding the practices of high-finance. This thesis will notattempt to weigh in on a or oversight, lack government of ratings agencies, corrupt practices, accounting than-honest lending on centered predatory practices on of behalf less- andbanks lenders, mortgage sub-prime say that the cause of the financial crisis has gone unexplained. Much of the discussion has critical allowing questionsalone, about the inner-workings effect of the financial with system to be left to the experts.precisely That is not to concerned is literature popular in crisis financial rippled throughout the modern world. It seems that much of the discourse surrounding the of which effects the as acatastrophe, can bedescribed many, event the To memory. recent The Sub-Prime Mortgage Crisis is the fifth in a series of major financial downturns financial major of inaseries fifth is the Crisis Mortgage Sub-Prime The The Sub-Prime Mortgage Crisis has been one of the most widely discussed topics in Chapter One:Introduction 1 CEU eTD Collection discourses. sub-primeprior mortgages to financialthe crisis; makings the of crisisthe lie within these to tipin by 2007. Unhindered hindsight, they express conceptions held by actorsregardingthe 2006. These articles represent awindowinto theworld of financehigh before market the began anddeal mortgagesub-primewith mortgages backed securities, publishedbetween 1997 and questions,atanswer these Ihavelooked which eighty andnewspaperindustry articles reports, prime mortgage securities? did3) How these helpdiscourses fuel to financial the crisis? To financial crisis produced? 2) What kind of surroundeddiscourses sub-prime and mortgages sub- financial crisis. It will attempt toanswer the following questions: 1) how was the climate for the interactions. analysis, taking as a rule that behind all theoretical frameworks lie a network of human economic behaviors. It is from this perspective that this thesis will use as the foundation for its constitute that andactions discourses created,aswellthe are that networks the interactions, markets to from attempts understandtrace financial groundup,attemptingmakings the to the of evolution of specific national markets within a historical Themostperiod. compelling literature extending as far back as the 1600s. Others have undertaken more specific analyses, showing the framework ahistorical financial within crisis which current the place patterns large-scale markets, and this thesis will seek to understand the makings of financial crises. Some have noted CrisisMortgage from 2007-present. and LoanCrisis from 1988-1991, the Dot.com Bubble and of 1998-2001, current the Sub-Prime The purpose of my thesis will be to better understand the effects of finance culture on the The academic literaturehas takenmany in tothe makingperspectives regards financial of 2 CEU eTD Collection their interaction. understand the effect of the state on financial markets, it is important to understand the history of describe aneo-liberal describe policy the toshowbrief and amotivation for together come increasing assuch, homeownership, Department of Housing and Urban Development. The discursive features of both the sample and samplethe of articles bewill compared with a policy brief issued in 1995 from Unitedthe States for the Sub-Prime Mortgage Crisis beyond its regulatory policies. Rather, the narratives shown in relations. The analysis will show that the state was a key factor in creating the cultural climate one another. As such,it is important to view the market and the state as a closed system of social reflect state processes, where both institutions,if they are to be seen as separate, mutually affect Following a pattern Following apattern inoutlined secondthe chapter, thesisthis will marketsshow that governmentality held bylenders and policy makers alike. Tobest 3 CEU eTD Collection commercial banking activities, like taking and deposits, investmentbanking activities, such as banks as institutions.separate Thismade it a federal foroffense any banker tobe involved in Banking Act of 1933. The Glass-Steagall Actfortify sought to commercial banks andinvestment century United States has its foundation in the passage of the Glass-Steagall Act, a section of the opinion among economists during the Great Depression. The structure of finance in the twentieth Crisis. Mortgage Sub-Prime will begin with the roots of the Bretton Woods system and conclude with the beginnings of the This section financial world. sweptthe practices and speculative shifted, capital accumulation exports, and focused promoted capital AfterWoods, nationally. Bretton ideology the behind system:Woods framework Bretton the established WorldWar after aregulatory which II state practice on the direction of the economy. Itcan be said that modern finance has its roots in statures in the global financial system. The results of the history will be to highlight the and Unitedthe States United the Kingdom becausewhich werechosen of their respective countries, two of development inthe events important highlight will section This vice-versa. and their interconnected nature; it will show how the evolution of the economy is guided by the state, highlight the role of the state in the evolution financialof markets, with an emphasis being on extends beyond borders intodifferent nation-states and economies. This section will attempt to The Great theWoodsSystem 2.1 Depressionand Bretton Chapter Two: Historical Considerations –From theGreat Depressionthe Sub to Prime The idea that the state should exert some control over the flow of capital was a prominent Trying to recount the history of modern finance can be tricky as the scope of the system Mortgage Crisis 4 effects of CEU eTD Collection 1 and 1960s. crucial in role promoting astable economy.would Thissentiment last much through of 1950s the international trade was established, reflecting the sentiments of the time that the state played a (Ferguson With2009:305). these supra-national two institutions, asystem regulationtightof of nationalized remained capital of movement the but country, to country from swiftly move ininvestment long-term the The(267-268). effects of institutions these two allowed trade to latter, governedinternational gold the be USdollar; peggedeither or the to currency to any required which payments, balance and rates exchange international over authority an Development and Reconstruction for Bank International the and Fund Monetary International the system were ofthis arose out that institutions The two trade. international system was met, and agreementWoods asameans Bretton established the of was governing national right tocontrol short-term capital movements” (266). It was under these auspices that an oppositionfloating to and rates exchange tocompetitive trade restrictions, andfavouring the “lay in theirtheir similarities plans economy, but apost-war for hadKingdom separate United a common mentality toward the role of the state in economic affairs. The United States and the (Foreman-Peck 1983:252-253). Dollar, prior to World War II, which helped create a stable platform for international trade examples of state intervention practices, such as the pegging of the British Pound to the US financial policy in the twentieth century. Itis possible to see other, albeitless significant, activity, which in remained place itsuntil repeal in1999 and was a definingfeature of US bond trading, simultaneously The law(Jackson 1987). createdtwospheres ofinvestment Thisinstitutionbecame theWorld Bank(268). More significantly, the planning stages of the post World War II economic order, showed 5 1 : the former as CEU eTD Collection regulation had contributed to a stable economy, the Bretton Woods System, as well as GATT, national in government Whereas United States, the less and speculative. similarly conservative Agreement on Tariffs and Trade (GATT). It can then be inferred that the financial climate was where was trade mostly export-based, spurredby favorable conditions outlined in General the demand. In this market climate, economic growth in post-war Britain was nationally focused, 267). The role of supplycapital was to labor opportunities for these and workers, meetthus this stemmingfrom an fullexpectation of employment for (Foreman-Peck British workers 1987: untilgrowth 1973 (Feinsteinabout This 1994:104). has been attributedtodemand sidefactors, welfare system erected in the post World War II era, enjoyed substantial post-World War II capital. of movement the the1960s throughout (Ferguson 2011: 11:00-13:10). Thiswas directly tostate lawsrelated over of workedatthe1970s, Chase Manhattan Bank asafinancial economist earning$45,000ayear conservatively. Paul Volcker, who would later become the head of the Federal Reserve at the end of investors who allocated their own funds for the firm, and thus managed their money billion dollar investment firms in the latter half of the United States, began as small partnerships Whatwould tomarket. which somehavebemulti- the attributed become the tightly regulated Depression, the United States had about forty years of economic growth, with few incidents, capital it could accrue, as well as the types of investments it could make. After the Great the US, or the Bretton Woods System over the world economy, was limited in the amount of subjectmarket, toboth national international and legislation, suchas Glass-Steagall the Act in Alternatively, Britain, which did not have a tightly regulated market, but rather a social During this period, thefinancial world wasnot particularly volatile. A tightly regulated 6 CEU eTD Collection trade standards for developing countries, as well as amutual dependence on capital from the divided the worldinto exporters of primary manufacturedandresources goods,with different (AbolafiaForeman-Peck 1998:3). noted establishmentthe of a new world which economic order internationally flow to it allowed and control capital lightened progressively mechanisms, capital nationally, the new system that began to take shape, via both formal and informal focused but to flourish, for systemtrade Woods allowed Bretton capital; the where on of controls 2.2 Deregulation theSavingsand and LoanCrisis yearstwenty later. spurned ‘Deregulation’ byfinancial (349-351). similarpractice produce would effectsless than over forty years,yet not as significant in the scope of this thesis because the recession was not becauseis it thefirstsignificantrecession hitto the United States and the United Kingdom in Great Depression occurred in 1974, due to an increase in oil prices. This event is noteworthy whims of the market (346). After three years of ups and downs, the first financial crash since the and foreign on markets currencies the to the other against subject wasincreasingly exchange The dollarcrisis wasthen (Foreman-Peck inmonetary 1987:345). “float” relations” said to goldthe standard effectively “producing BrettonWoods System the dismantled of an atmosphere this changed when the United States made the US dollar a ‘fiat’ currency. The move away from exchange rates, where currencies could either be exchanged for US dollars or for gold. In 1971, depressionits post-war (Feinstein 1994:105-106). markethadconditions safe for created the practices investment pull helped which Britain of out From From 1970suntilthe present, financial the the can beworld byaloosening characterized The IMF, being an institution intertwined with the Bretton Woods system, regulated 7 CEU eTD Collection United States. Initially, Savings and Loan Associations United developed to helpStates. home-buyers finance foundations of Savingsthe and Loan Crisis 1980s the of and early 1990s began form into the Thatcher’sthrough supply-side economic policiesDuring (Supple 1994:345). period, the this Britain similarly underwent aprocess of deregulation during the same time period, specifically controls regardinginterest rates (Federal Insurance DepositCorporation [FDIC] 2000:8-10). measures Specifically,less of some included risk deregulatory protection,these aswell as factors opened banksthe less up to protection andmarket thusconditions. more to exposure such, this process reflects how economics affects state practice. In general, these legislative legislation reflects principles being generated by economic institutions, as well as academics. As deregulation had been taken on by the USlegislature. It can be said that the modernization of had in legislative Unitedthe andawidespread amendments been States of ‘modernized’ project practices of financiers. the affected of capital, directly liberalization the specifically in international governance, shift capital accumulation was not only a duty, but necessary for the growth of the world economy.A 2009:314). Thedissolving of System, Bretton the Woods createafinance helped culture where “making a hitmeant making a billion dollars on a single successful speculation” (Ferguson where a mentality adopted had street wall new the conservatively, money own their invested hadcultural climate Where changedmarkedly. before had 1980s,high-finance the investors was in Itby state. and capital was hastened 1980sthat prioritized the the accumulation the responsibility for raising and accruing capital.With relaxed border controls, the process of posited from developed andprimary developing countries the resources developed countries like theUnited States and the United Kingdom havingas the A publishedreport by Federal the Insurance Deposit Corporation describes how 8 (Foreman-Peck 1987:371). This CEU eTD Collection Mortgage CrisisMortgage 2008, aproductof modernof the conditions.market for this type of economic activity. The next section will provide a general overview of the Sub- in state policy, inspired partially by innovations in market ideology, have created conditionsthe changes is of toemphasize that because bustit. It important suffers awidespread economy then the businessthe by is wealth cycle inspired generated practice; duringspeculative the began to arise. As such, the modern economy can be said toproduce a cyclical money safely.After the Bretton Woods System dissolved in the 1970s, speculative sentiments market. speculative sites (124). Both of these instances show how the state inspired a shiftfrom a conservative toa web- particularly companies”, of futuretechnology earnings expectations the about exaggerated asitdot.com bubble, came tobeknown, wasa speculative bubble which “had been basedon roughly years occurred laterfinancial The crisis andinvolvedten speculative tendencies. similar major next The activity. economic influences practice state how market: the in speculation Savings and Loan crisis can be seen as an example of how financial deregulation led to rampant exceed the demandfor thehousing was being that (Ferguson 2009:253-258). produced The came intoplay, but as was the case in residential real estate in Dallas, TX, the supply began to practices fraudulent cases, In some still backed institutions. these United States thatthe being Thecatch estate. commercial cards real to from credit ranging mortgages, besides things in other initially governmentsubject to regulation, in werederegulated 1980s,allowingthe invest them to theseinsured These organizationswerealso by Associations, depositors; government. the andworkedcooperatively mortgage, in sensethat the ownedby association the was its After World WarII, regulatorythe climate was one in which financiers invested their 9 boom booms and , and the and , bust in CEU eTD Collection securities. of market sub-primethe is mortgage intertwined growth with the of mortgage sub-prime investors;attractive to marketthe would$332 grow billionto by 41). 2003 (37, Thus, growth the “when billion, backed with securities] [mortgage became loan sub-prime collateral more did sector see muchsub-prime not 1995,whereuntil $65 market the growth totaled about after histories and low outstandingand debt, wereconsiderably cheaper than sub-prime The loans. outstanding debt (34). By contrast, prime loans were given to customers with good credit creditpoor histories,including frequent late payments, bankruptcies, orhigh amounts of prime loans, which, by contrast, entails a lower payment scheme; these applicants tend to have delinquentpayments (32). Typically, loans these weregiven to people whodidqualify not for like well as longer term insurance,feescosts andmortgage associated higher principles, with “upfrontcosts” which include from fees, various ranging feesapplication appraisal to fees, as The prime mortgages. distinguishing between feature prime loans and loanssub-prime are This2006:38). stagefor market, setthe whichfrommortgage sub-primethe differed traditional and mortgages Pennington-Cross forto legallyallowed(Chomsisengphet adjustableexist rate Parity Act in 1982, which respectively abolished government led controls on deposits and Transaction Control Act of Mortgage 1980 andtheAlternative and Monetary Deregulation The Sub-Prime Mortgage Crisis has its roots in the passing of the Depository Institutions the financial crisis, but rather provide the background for which such an analysis can take place. Sub-Prime2.3 The inPerspective MortgageCrisis This section will not attempt to theorize the role of the state and the market in regards to 10 CEU eTD Collection incurred on incurred on investmentthe (Lewis 2010:29).Unlike insurance, however, CDSsdonot require fixed term. If the loan defaults, the person is paid alarge sum of money coverto the losses they aninsurancetheoretically policy, wherethe person purchasing makes paymenttotheissuerfor a default swaps (CDS) were used to fill this role in the sub-prime mortgage market. A CDS is also go “short” on a security, which says the investor is betting that a security will default; credit could one token, By same the pays off asexpected. investment the hoping that say are they that security contained. loans the that of the benefits reap the hoping to in tranche a security, Schuermann After 2008:10). security the was rated,aninvestor was given optionthe to buy any agencies, who are private companies, are paid by the arranger to assign a rating. (Ashcroft and AAA bondrated would be less likely defaultto than a BBB (Lewis 2010:50-51).Theratings the United States, would rate a security in terms of the likelihood that the loan would default; a loans for purchase and assign them a rating. For example, Standard & Poor’s, a rating agency in interest. The role of credit ratings agency in this process is crucial; they assess the quality of the this, they are purchasing a body mortgages of which will theoretically pay plus investorthe does Whensomeone ofinvestment. because highpay the backedsecurity mortgage the of off a Commission and(Ashcroft Schuermann 2008:5). A person mighthave aninterest in purchasing Exchange and Securities the with portfolio loan the files then and loans, the for buyer finds asafe agencies, this ratings the with verifies and‘tranches’ different theloans into ranking and the originator sells them to an arranger. The person assesses the quality of the loan by accumulate begins to Apool is mortgages higher. loanof borrower of cost to the the the because originates Any investor Any investor bought that a security was said tobe going“long” ona security, whichis to begins a company when The process is complex. notably of securitization The process amortgage for aborrower. The originator has an incentive tolend to the borrower 11 CEU eTD Collection credit standards in U.S. mortgage lending were relaxed in the early 2000s, and that rising rates of deemed the official causes of the financial crisis. It claims that “it is generally accepted that (Ferguson (Ferguson 2009:8). of the tranches failed in one package, it likely failed in another, making for a very potent crisis a piece of CDO “C”; and CDO “C” would contain a piece of CDO “A”” (131). Thus, when one found difficult sell….CDO to “A” would contain a piece of CDO “B”; CDO “B” would contain had creators theirStreet Wall tranches presumably those CDOs, of other tranches repackaged “simply CDOs,asaCDOarranger with intertwined other is were This because CDOs itrated; is thisfinancial instrumentwhich mostcontributed the damage tothefinancial system. rating on investmentthe becauseincluded it aninsurance policy CDOs (76). were risky and mis- Often times, these were packaged with a CDS to form a synthetic CDO, thus improving the doing initially low-rated so,these wouldbetranches upon given higherrepackaging ratings (73). prefaced on the idea that not all of the loans would defaultin the same place at the same time. In from geographicprime mortgages andthen locations, different bond,repackaged asa different mortgages prime (Lewis 2010:72). Itwasconstructed of riskiestthe tranches from pools of sub- (CDO). Similar to the CDS, a CDO was initially a tool to help minimize the risk inherentin sub- swapsfrom ballooned $900 billionmore to than $30 trillion” (Times Topics 2011). The popularity CDSs of was immense; “[b]etween 2000 and 2008,themarketfor [credit default] derivative. asanover-the-counter and They unregulated, traded tool speculative (75). were also that the person buying owns the security they are insuring, which makes these instruments a A report written by the The final piece of the sub-prime mortgage crisis puzzle is the Collateral Debt Obligation Congressional Research Service Congressional 12 in 2010 summarizes what can be CEU eTD Collection of of sub-prime lendingfirms (Financial Crisis Inquiry Commission Each 2011:23-24). of these crisis, according to the commission report. These stem from relaxed lending standards on behalf lending weresaid Predatory be practices financial crisis. amajor to financialto the contributor One of the conclusions not mentioned in detail is the role of predatory lending practices in the own financial report lists a whole host of conclusions,many of which were mentioned above. advocating achangein (Wahlinreporting standards By 2008:2-3). the contrast, United States securities);like bodies, known 3)regulatory (also SEC, as OTC,orover-the-counter the Commission of derivatives and being securities outside traded of a formal institution trading like from financial securitization; Securities2) encouragement andExchangethe techniques factors:three 1) USgovernment regulatory agencies having apolicy of creating housing via new policy. Christopher Wahlen of the Network Financial Institute at Indiana State University notes changes in crisisto government rootof the the Some attribute al researchers 2008). et. (Gerardi a knowledgesuggested that in about turn should market housinghavethe beenpredicted process was a factor in a borrowers chances of defaulting (Demyanyk 2008). Others have above, which claims that relaxed lending standards, specifically during the credit assessment effect on whether or not a person would default; this implicitly counters the theory outlined refuted the report’s initial claim, saying that a lenders credit score did notnecessarily have an management, bad economic models, and a preference for short term gains (4-8). Some have ratingsthe agencies, faulty accounting, deregulation, government financial innovation, risk poor institutions, nooversightregarding finance, mortgage poor criteria used for ratingloans within imbalances in trade, where underlying tensions in the deficit putfinancial strain on the (Jickling 2010:2).Thereportproducesachart outlining arguments including the global delinquency foreclosuresand delivered asharp shocktoa range of financialU.S. institutions” 13 CEU eTD Collection for the financial crisis. financial the for created conditions the an actor-network that show thesiswill this actors, ormarket state atomized role of the market and state in creating such a climate. Where much of the criticism deals with the understand fail to They financial crisis. caused the aspect of what adifferent causes outlines 14 CEU eTD Collection national regulatory framework. a of aid the without possible been have not would century twentieth early and century nineteenth innovation As(183-187). such, period financialization the of swept Britain that at the end of the state asserted control over the flow of capital, which had the adverse effect of directing financial inhibitedthe which currency specifically exchanges, speculation, creating structures regarding structure aided theinnovation of British financiers in nineteenth the century (Knafo2008). By torch to the next global power (132-135). More specifically, Samuel Knafo shows how state turned to financial mechanisms to maintain their empires, before petering out, and passing the “peace” enjoyed during Britain’s colonial conquests (1800-1914).In both cases, the powers two hegemoniesother asevidence: the Dutch after treaty the Westphaliaof (1645-1800)and the “financialization”, whichindicates decline the of hegemonic a power (Arrighi He cites 2000). Crisis, as well as the Savings and Loan Crisis and the Dot.com Bubble, with a period of ranging from one hundredyears to thirty. Giovanni Arrighi associates Sub-Primethe Mortgage 3.1 Markets from Above player. asa factors prominent state the where actor-network, an as markets financial of construction the be on will section second of markets, as well as more contemporary theories regarding globalization. The emphasis in the cyclical nature about implications which theorize level will be processes, ‘macro’ on historical, The emphasis insection first accounts. the more contemporary aswell as perspective, historical For many scholars, the financial crisis fits within a broad range of macro level processes, This willchapter highlight patternsin financial markets highlighted by scholars from a Chapter Markets Chapter Financial Three: Theorizing 15 CEU eTD Collection the national to the global scale; the second is the increased use of securities, which stems from a are processes breadth which whichexpandthe from decompartmentalization of markets, capital fournoted new structural changes modern to financial (Cerny markets first1993). The is forces. societal rather evolve butother with activity,own transformations in functions.regulatory Markets themselvesgovern donot themselves by their by is noted of activity economic the that transformation then asnosurprise comes without”, obscuring the distinction between economic activity and society as a whole (58). It entities,separate he claims that“[m]arkets arenot institutions functioning within an economy but relations (Polanyi Whileis1957:56-57). it possible see to thethat state and economyfunction as economy. For Polanyi, all market and state activities take place within a closed network of social flow it allowing international,unevenly albeit (Abdelal Baines 2002). 2006:3-4, borders, national from capital of liberalization the for allow eventually would mechanisms, which feature prominentlywould in thederegulatedstate of 1980s.Thisthe period For the Konings andPannitch, for this madeit new thefinancial possible create world to attitude financetoward during 1950and the 1960sand, assuch,had akind cultivated of trust. expertise over the financial (241).Financialworld institutions had maintained aconservative politicalthe system andPannitch(Konings This had 2008:229). theof effectcreating aveil of both international and national, were ways to assuage the working classes and integrate them into similarly in unfolded Unitedthe For States. Pannitch and Konings, the regulatory frameworks, Other theorists have analyzed these processes more precisely, such as Phillip Cerny, who Karl Polanyi understands the role of the state as crucial to the development of a market Following this train thought, LeoPannitchof and Martijn Konings how show this process 16 CEU eTD Collection organizations,institutions, and more generally, the objects in a particular society which are Caliskan They 2009). thisunderstand constitute as “the that processes behaviours,the Koray Caliskan, the process of ‘economization’ is the process of market making (Callon and created in a set of behaviors, as well as the institutions that they form. For Michel Callon and 3.2 The Makings of Modern Finance markets, which will be outlined in the section below. However before this can itbe discussed,is importantunderstand to the production financialof scale. aglobal on instruments financial of dispersion inthe seen be can claim theoretical state precluded by a liberalization trade restrictionsof (FougnerAs 2006). we will see, the which flow: is compete for aprocess capital wherestates of state, making the a competitive respectively (50-52). The “revitalization” of the nation state can be said tobe synonymous with regional,national, and global, where the latter two are said to be “revitalized” and “intensified” (Brenner 1999). This goes hand in hand with the creation of different scales of authority, urban, geographic expansion of capitalism, which is predicated by an expansion of state authority everywhere. For Neil Brenner, these processes would notbe possible if it were not for the financiers for of profits help the accumulation across globe to aid the spread to been able since the dissolution of Bretton Woods, by which the flow of complex financial securities has of capital, decompartmentalization the crisis financial as uptothe leading theevents to interpret of capital; fourth and, the are processes of Through globalization (56-68). thisit lens,is possible decreased profitability loans; of thirdfinancialthe innovations whichaid are in accumulation the will be to avital prove in aspect makingthe of market; effects of the a financial this This thesis understands culture in of culture terms understands This thesis 17 economization , which is to say that culture is competition CEU eTD Collection these two points is important for the contents of this essay because it emphasizes aglobal emphasizes it essay because of this for the contents ispoints important two these over those states; second, this power is limited toa select number of nations (28-29). The first of impose first, and states technical standards assuch,network: on states, authority other exercise in-hand with a transformation of the state (Sassen 2000b:19). Sassen notes two features of this able to exist globally.For Saskia Sassen, the rapid rise of these digital networks has gone hand- markets” (4). Without the ability to transfer funds instantly, the financial world would not be present and future value of stocks, options, commodities, currencies, and are traded in various They particularly emphasize the role of a technological infrastructure which “combine the and markets on creation deregulation of (Carnoy the of digital and Castellsnetworks 2001). in regards to globalization and the use of innovation and securities, but instead place an emphasis intoa web of social relations. This section will elaborate on this notion. discourse materiality, and practice, influences, of different is these coming together the market financial whichchangein relations andconcrete objects, The of tapestry unfolding dispositions. purely a spatial network or a body of intellectual activity,but a combination of both social nor arethey acting 1984:487).(Granovetter purely of out self-interest In itthisis sense, neither relationships; the idea being that an actor is neither entirely embedded within a social context, in of a network social process is ongoing economic hasan activity that stated Granovetter Mark andperformative. discursive isboth sense, culture this In activity. of economic culture from being atomized, to anetwork of influence, which could constitute what could be called a produced out of behavior, not what governs behavior. It is in this sense that market forces go (370). With this as a base,it becomes possibleunderstand to the economy as something that is tentatively and often controversially qualified, by scholars and/or lay people as ‘economic’” Martin Carnoy and Manuel Castells have noted similar processes to those noted by by Cerny noted those to processes similar noted have Castells Manuel and Carnoy Martin 18 CEU eTD Collection is an appropriation of non-economic knowledge activity,is knowledge where suit redirected to distinction between between knowledge distinction commodity forms acommon to itsprior appropriation 2000: (Jessop 72-73). Jessop sees a fictitious where the practice, andnon-economic practice between economic distinction expanded upon idea,this including knowledge in list.Polanyi’s Jessop,like Polanyi, seesa work, and value are land, labor, and money (Polanyi 1957:72). Others, like Bob Jessop, have by appropriated capitalism andthe state for profit.Polanyi, For forms appropriated the ofnature, of fictitious commodities, which existed prior to the development of capitalism,but were can can be via traded networks, be digital be saidto a typeknowledge of production. increasingly based on abstraction (Carrier 1998).The production financialof instruments, which process James G. Carrier describes as describes Carrier G. James process transformation from a tangible commodity intoa financial instrument is possible only through a mortgage; valuethe in security the stems from madepayments onthemortgage. This Forexample, tangible asset. asub-primefrom security its value mortgage derives a sub-prime say theirthat profitability is derived from their obligations, credit default swaps are not tangible commodities, but intellectual ones. That is to debt collateralized securities, toremember that important Itis objects. concrete tangible, is created. that type of commodity foreign boundaries. The creation of a digital economy is an essential component, as well as the cultural permeate hegemony state-ledhigh finance, whereparticular of practices technical As such,it is possible viewto how these instruments are an extension of Polanyi’s notion The flow of commodities over digital networks wouldbe if possible not networks were overdigital they The flow of commodities a priori virtualism and a posteriori theoretical 19 , which is understood as economic practice capitalism. The process of securitization process The capitalism. value deriving from derivingfrom valuethe of a CEU eTD Collection actor-network, which together form the basis for the processes of surround them, are entangled in practice, discursive structures, and materialities, constituting an emphasizes the world-views of those involved. The network, as well as the social relations that happen (24-25). Where Hughes emphasizes the physical network of social relations, Callon in and scope influence, butwithout them, production the of artifactthe in question wouldnot together in production the of an object For (Callon 1986). Callon, worlds actor tendtododiffer this structure, emphasizing a network of entities, social relations, as well as actors that come lines, paper, and homes. Similarly, Michel Callon’s notion of the “actor-world” elaborates on mathematicians, economists, and value; and concrete components such as computers, power componentsabstract like originators (sub-prime mortgage lenders), assemblers, traders, digitally, the production of financial commodities forms a forms commodities financial of production the digitally, beinformation transferred the that andalso necessity the network, knowledge production production of sub-prime mortgages and sub-prime securities. mortgage Given abstraction the of developmentlaboratories, and investment banks” (287). Similarly, there exists a network for the and research academic firms,companies, utility manufacturing mines, physical artifacts, artifact, might be the outcome of a network of “electric-light, and power systems….[as well] as of components, by which an is artifact produced. example,For production the of an industrial network utilizes production industrial how describes He light. in asimilar markets financial view which science and form technology a tapestry of production (Hughes 1986)anditis possible to market. financial of making in the component the purposes of capital accumulation. Thus, the production of knowledge becomes one Thomas P. Hughes describesindustry as forming as a 20 seamless web seamless seamless webseamless economization of different components: of of technology, by . CEU eTD Collection on a individual in the ideal image of government1991:92). In (Foucault this sense, Miller For 1992). these thinkers, governance the isdiscipline; itis the self-policing of an the state is a dispersal of techniques of governance (Foucault 1991, Mitchell 1991, & Rose and these markets remain static, but are subject toa variety of influences in space and through time. itis in this network that the market is made as both a meaningful enterprise. It is notsimply that 2007). In doing so, they both perform and reinforce the legitimacy of their action. In other words, both disseminate (Hardie2005), andreceivevia an andMackenzie knowledge actor-network “performativity” in financial markets. Callon notes that the financial market is market financial the that notes Callon markets. in financial “performativity” algorithms in their calculative functioning (1241). This forms the basis of what can be called human function, as well as a mechanical function performed by machines, both of which utilize Muniesa 2005). Citing the example of ‘the double auction’, they note how trading is both a in economics, have become an essential part of the creation of financial commodities (Callon and and Donald MacKenzie note how and note hedgefunds, MacKenzie Donald as social and technical arrangements, which perform and give meaning toperformance. Ian Hardie counterperformations” (335). Thus, it becomes possible tospeak of and revivethepossibility becomeof infrastructures a newcycleof and performations incorporation of theories, statements and tools which, transformed into algorithms,into routines, (Callon 2006). The theory of performativity in financial “enables markets us tostudy the as these ideas becoming apartof not interaction, butdaily only themarket, drives variety of actors, by which rational calculation is only an element. The interplay of ideas, as well performativity Michel Foucault, and those associated with the Callon and Fabian Muniesa have shown how ‘microstructures’, i.e. algorithmic practices of government: it is acted, and in a sense, its action derives its meaning. For 21 agencements governmentality (see also ‘associations’, Latour agencements school, have argued that argued have school, governmentality performed , which are is themarket by a CEU eTD Collection Sub-Prime Mortgage Crisis. Mortgage Sub-Prime entanglement, tugging on the thread of discursive structures, so as to reveal the state’s role in the section has elaborated upon. The next section will emphasize the state effects in this the then asanactor-network, articulated asaclosed of relations, system state social the economy and the gives a crucial distinction for the for distinction crucial a gives whichdiscourse tosustainattempts marketforces (Rose and MillerTheirinsight 1992:199). but as a structural effect. For Nikolas Rose and Peter Miller, neo-liberal governance is a to see modern economic exchange as showing the signs of governance, not as a distinct entity, becomes possible practice. It leaves from mark its ‘economic’ on exist notseparate society, does make appeartoexist” that (Mitchell governance,practices which Thus, suchstructures 1991:94). should be examined notas an actual structure, but as the powerful,metaphysical effect of Timothy Mitchell, “[t]he state needs to be analyzed as such a structural effect. That is to say,it governmentality school incorporates state practice into the web of social relations this relations social of web the into practice state incorporates school economization 22 of the globalized market. If we are to understand CEU eTD Collection should fitinto that world” (Callon et al 1986:223). The abundance of common themes in each of appropriate relationships, and they simultaneously make an argument about how the reader elements, wantsbuild. world suggesttheirThey juxtapose the theirto “encapsulate that author ontological status of these articles as artifacts of actor-worlds. In a sense, these articles has been derived from context, but rather from the articles themselves. As such, Isee the and backed Thisprime mortgages mortgage wereconstructed. securities something is that not strategies; and, DC for petty critiques. qualifiers: DA for abuse predatory lending;or DD for downturn; for badDI investment the text: Efor euphemisms; and, D for dissent or doubt. The latter is accompanied with a list of used I alsocompetition; secondary help codes two identify within to certainfeatures discursive for opportunity for G+ borrower and G-for positive and negative growth respectively; Cfor establishedis based four on primary themes: OL for opportunity lenderfor or investor; and OB I Thecoding scheme 2005:5). (Latour elements” heterogeneous between associations trail of based on associations. Once common themes had been established, it became possible to trace “a anarrative anddevise whichformed hadcommodities, these around social the context’ ‘deflate reading of the articles, where Iattempted to trace the main ideas. In doing so, Iwas attempting to phase firststages. The wasacareful place in two research took The 2002 and2004. between they were published. sample The of articles is from 1997-2006, with a notable dipin output in time which second, the keyword; the to theirfirst, relevance factors: two basedon selected backed and“mortgage thekeywords They securities”. “sub-primemortgage” searching were These themes represent a tapestry a These by of a tapestry represent associations sub- themes narrativewhich surrounding For this thesis, Ianalyzed eighty articles taken from the Chapter Four: and Methodology the Sub-PrimeNarrative 23 Lexis Nexus database after database CEU eTD Collection surrounding the growthof followed the surrounding market, the by adiscussion influenceon the of competition. opportunity for investors, despite highthe involved.risks Iwill follow withthen discourses will then move to how the creation of a sub-prime mortgage market represents a good prime mortgage market corrects that injustice by giving borrowers a chance at home ownership. I about each theme. I will show how being denied homeownership is an injustice, and that the sub- conceptions particular articulate which articles key emphasizing temporally, unfold will below above and itis possible to see the narrative unfold from the bottom up. Each of the sections five. onin chapter elaborated to the lender. This process was entangled with a state ideology, the details of which will be mortgage backed securities, since the borrower was contractually obligated to pay the loan back a relatively short period of time. This made for a relatively safe investment when it came to payment ahome, itwouldprocure mortgage also bemadein the guaranteed butthat theoretically borrower the both for beneficial being history via the sub-prime loan. This was a process known as creditmigration, which was seen as they eventuallyfor after atraditional loan theirimproved hadto expected credit re-finance for those who did not qualify for atraditional loan. Those who took out a sub-prime loan were market justification Itsprincipleoperated. mortgage was thatitwas providinghomeownership broader view,it becomes possible to see a narrative woven from the threads. sub-prime mortgage Asmarket. such, Iunderstand each as code linked together, andby taking a articlesthe wouldsimilar suggest Each of the codes represent different themes in the narrative outlined in the paragraph in the outlined narrative in the themes different represent codes the of Each As the data will show, the narrative qualifies afew things about the way the sub-prime associations and the lender. Not only did it allow people to reasonably held by each of the actors in relationship to the 24 CEU eTD Collection prime lenders into accession asubset of Council the LendersMortgage of titled Non-Conforming market howthesub-primedescribes had legitimacy mortgage recently some due to gained sub- a home; secondbeingitthe correctfunctioned a that to problem inherentwithin capitalism. opportunity-for-borrower discourse: the first being that it was a positive way for people to secure this was directly aimed at minority groups. It is possible to allocate two functions in the housing system. In these cases, the opportunity for the borrower was implicit, and in one case, articles would posit thesub-prime market mortgage as correcting aninjustice inherentin the financial advisor would pass the information on to the future borrower. In other cases, the articles independent the aremarketed financial cases,independent In these to advisers. the cases, butinmost via anewspaper outlet, borrower the directly to wasmarketed cases this some deals, which are meant toentice the borrower into taking out aloan with a given company. In 2000, onein 2001, four in 2005, and eightin 2006. Much of materialthe described specific loan eighty, orabout 23% of the articles. The distribution by yearis one in 1998, two in 1999, two in for4.1 Opportunities Borrowers above. outlined narrative the for basis the form which articles archetypal rather but sample, narrative as it conceived before the crisis. The following sections do not present the entire of Housing and but Urban Development, before occurs,itthis isestablish important to the sub-prime mortgage narrative, by analyzing adocumentissued by United the States Department document discursive features. The following chapter will emphasize the role of the state in the were used primarilyIt shouldbenoted secondary (euphemisms the that codes and dissent) to In early 1999, in numbered for sample of the opportunities-for-borrowers nineteen coded The articles Money Marketing ran an “A titlearticle Sub-Prime Opportunity” which 25 CEU eTD Collection payments of 3 percent less” or (Heavens 2000).Minority whoborrowers, have historically been percentor less, putting 16percent less, down 5 percentor providing and4percent down households haveflocked tothese withproducts, percent 30 of in buyers 1999 putting down 10 Cash-strapped borrowers. all helped have loans payment “[l]ow-down that say to on goes haveand minority borrowers tomany.’” helped extend homeownership opportunities The article Developmentwas quotedsaying innovation industry “‘[m]ortgage and outreach to low-income a possible solution. Nicolas P. Retsinas, the director of the Department of Housing and hadmarket limited the opportunity minority of to borrowers obtain a home,it butalso describes minority home ownership in the United States. The article claimed that the booming housing how, despite the booming economy, there had been little change in the gap between white and for sub-primequalified loans were seenas having aninjustice donetothem. 1999b). This article reveals a very important facet of the sub-prime mortgage market; those who population has been disenfranchised from financialthe service industry” (Money Marketing “[showed] noappetite for [sub-prime It borrowers]. is as if and fourone of workingthe intoan industry run and regulated oversightgroup. At thisin point majortime,financial firms withare finally within market duetotheir abletoborrower confidence sub-prime the accession relationships with people they can trust.” Thus, for the borrower the world is opened: those financialbusiness thatthey buildingestablished[independentbetter advisors] with are market thesub-primeThis as a established mortgage respectable entity is as “[c]onfidence environmentin UKhousingthe markets” andmortgage (Council Lenders of Mortgage 2011). industry oversight commission in the UK, whose aim is “tofoster a favourable operating Lenders Working (Money Group Marketing 1999b).The Council Lenders of Mortgage is an Playing on thisan concept, article in printed in2000 the 26 PhiladelphiaInquirer described CEU eTD Collection as a way for those with a few ‘credit blemishes’, to right the wrongs of their past. By correcting legitimacy gained market lending sub-prime the Overtime, go sub-prime.’ to bullet the ‘bite not system, because of extenuating circumstances, that opportunity would not be realized if she did sense, the opportunity for her to realize her dreams were closing quickly, and do to an unjust found the home of her dreams, couldnot stand to waituntil her creditratingimproved. Inthis The article stands as a testament to the virtues of the sub-prime market. The borrower, who who, as the title states, ‘bite the bullet to go sub-prime’. The short article reads Telegraph solution. asareasonable forces alleviating thisinjustice. This alsoexhibits a neo-liberal of the population, the discourse shows that the sub-prime mortgage market was a way of borrower. Where the opportunities for obtaining ahome werepreviously limited to this segment to own a home despite all obstacles. Sub-prime mortgages are a beacon of hope for the minority subjected to a myriad of social injustices over the course of US history,finally have the chance In 2006,a testimonial about sub-primethe market wasprinted in London’s . The short article stands as an artifact professing the opportunities in store for those loan and a good credit record. (Downes 2006). (Downes record. credit good a and loan remortgage after the two-year fixed rate ends. By then,I should have a better choice of the bullet and I was offered a two-year fix at 6 percent by Advanced Home Loans. I’ll mortgage available to me was a more expensive sub-prime of type home only loan.The I decidedwrong. Iwas but to bite mortgage., a getting problem no have I would thought I found my dream home. Earning a decent income and having a 15 percent deposit I ended up missing a loan repayment. This was to cost me dearly, because in the meantime autumn but I didn’t start getting paid until December, and because of cash flow problems the property ladder was to take out a sub-prime mortgage. I turnedon get full-time I could way only freelancethe that last discover to shocked Iwas home dream my found Having 27 governmentality init affirms market that The Sunday CEU eTD Collection the inherentthe risks involved with lending, typethis of butinstead attempts dissuadeto thereader command. The asking price was for this tranche was $150 million. The article does not mention its anticipated pay off, of 0.7 years and a rating of AAA, the highest rating a security could a sub-prime made mortgage available by Kensington Mortgage Company, was “agiven life”, or tranches and the prices they are demanding, as well as the duration of their pay off. For example, and their eventual payoffs.A variety of securities were advertised,in terms of their credit ratings, Busy Month’ by printed for Prepares ‘Market backedtitled Anarticle securities. mortgage for read likeadvertisements and lendersalike. is articlesthe presented sub-prime thatthe mortgageis security asafefor borrowers, opportunity in overarching theme The markets. both on forms,new new as well took securities as mortgage Each article also gives a window into the expansion of the market, whereby the sub-prime articles wouldlanguagethese tofurtherthetransaction being useexpert legitimize undertaken. securities are understood as opportunitieslenders for maketo relatively safe Often, investment. 2005, andeightfor 2006. The articlesform come together to narrativesdistinct by which by code yearis asfollows: onefor 1999, two for 2000, one for 2003, one 2004, for forthree as other codes. There are a total of sixteen, orabout 20% of the articles. The distribution of this 4.2 Opportunities for Lenders and Investors to lenders as well, potential where couldprofits be sharedby both parties. this sub-prime injustice,not the only market itself,but legitimized itself but opened borrowers, to Much like sub-prime many mortgages, of articlesthe dealing with sub-prime mortgages in aspervasive arenot articles, these opportunity-for-lenders code The prevalenceof the Asset Sales ReportAsset International 28 in 2000, described different securities CEU eTD Collection investment because no one, as atomized actors, would maintain a loan at the cost of at cost at the maintainof aloan borrowing would actors, no asatomized one, because investment is loan a safe thesub-prime the borrower, machine. For mortgage logic sub-prime of the refinance when their creditrating hasimproved enough qualifyto for aprime loan. This is the borrower hypothetically repays the loan in a timely manner. It is implied that the borrower will lending to sub-prime borrowers. While the risk is substantially higher, itis lowered as the shows have sub-primechargeThis excerpt an borrowers higherthat to feesfor opportunity enter and pushto Halifax’s sub-primemarketthe that claimed opportunity being presented to the lender. It described General Electric and the Bank of showed adifferentPrimein Market” tosub-primemortgages; opportunity regards the for theinvestor. opportunity aperfect representing investor’s money. Itis in this sense that securities are understood to be a safe investment, of use the of technical language, that but upmost the caution has been used toprotect the because that havebeen securities professionally the borrower the language assembled reassures assets is that This(Davies two between there type of 2000). adifferencein potential profitability borrower for their repayment, and making available ‘any excess spread’, which essentially means These include concepts like ‘subordination’, which means that a creditor has set a priority on a by from techniques concerns these ‘creditenhancement’ claiming hadbeenemployed. the that An in article printed or more years with the sub-prime lender.(Money Management 2001) only move to a high street lender when their credit rating has been cleaned up after three after little more than three years because of the higher interest rates. However, they will they are taking a greater risk. People who take out sub-prime mortgages usually leave [s]ub-prime mortgages enable lenders tomake higher margins which they justify because Money Marketing in War2001, titled “Mortgage Moves to Sub the 29 CEU eTD Collection increased diversification, as well as the spread of sub-prime mortgages throughout theglobe throughout mortgages of sub-prime as well spread as the diversification, increased considered late comers tothe sub-prime mortgage (Mavinmarket 2006a, ColomerThe 2006). a wayfor lenders “‘to meet the unique needs of in sectorthis Hong Kong’” (Davies 2004). securitization would offset the cost of the lost for the lender. The article celebrates the process as compared to the initial investment had initialcomparedthe investment to whoserelative worth mortgages securitize ideain wasto the where Kong,occurred Hong variety of suchas new securities, backed-security.a ‘negative initially equity’ mortgage This of bonds, their potential to pay off early, aswell as their perceived relative stability, spawned a high-yieldingbonds paidoff 2003).Withinearly” (Schriffers marketa year,the for these types these [investment] funds, which invest in portfolios of bundled mortgages, find many of their for stable long-term investments. The article claims that “[w]hen homeowners rush to refinance, article in printed 2003 detailed theyear’s best short-term investments, as well makingas aguess the profits of their good will. where the lender, who presumably offered a fair deal to begin with, can simply sitback and reap interest rates, high loan of tomoveoutside the rating enough toimprove their credit borrower the dream of profitin both safe loans and a brand new home. In this scenario, it is up to the governed by an image of opportunity. Both the borrower and the lender had the ability to realize are responsible and trustworthy, they can refinance later at a better interest rate. The logic was end of two years, plus interest. The borrower also had the opportunity to own a home, and if they sub-prime rates. In theory, the lender would receive all of the money that is owed to them at the By securities2006, the had market expanded to Irishthe and Canadianthe market, both This carried overtopeople whopurchased securities sub-prime mortgage as well. An decreased 30 . The logic behind this was that the process of CEU eTD Collection profitability. because it productioncentered the loansof within aframework oflegitimacy and potential score improved. The proliferation of sub-prime mortgages, i.e. growth, is a key discursive feature a relatively safe investment, given that the borrower should pay off the loan once their credit Thus, in market sub-primetheory, the was mortgage a perpetual loan machinefor investors, and, improvesratingby making on theborrower time.are toberefinanced after their credit payments Sub-Prime loans, which intendedare customers for credit with imperfect ratings and histories, thelender,For is it anopportunity intoto tap one of growingfastestmortgage the industries. and thirteen from 2006. In the sub-prime world, growth is the reason to enter the housing market. from from 1999, six 2000, onefrom 2001, threefrom 2003, threefrom 2004, ninefrom 2005, mentioning positive growth, or48%. The distribution by yearis as follows: onefrom 1997, three It is a key discursive element, represented in the sample by thirty-nine of eighty articles sub-prime sector is growing, both lenders and borrowers a like should seek a piece of the action. 4.3 Growth sentiment. creating animage of safe investing. The growth of marketthe would be not possible without this indicates that the market had begun to grow and become more competitive, while simultaneously increased opportunities for borrowers to find better mortgages. Conceptions of sub-primethe profitable loan terms” (Fernandez 1998). Thus, growththe of marketthe is intimately linked with lessbetter, lenders toofferleading sub-prime more fierce, competition become has grown, A 1998 article in From earliestthe phases of sub-primethe bubble, mortgage keyidea one persisted: the The Philadelphia Inquirer 31 claimed “as that thesub-prime industry has CEU eTD Collection specifically with specifically lendingwith the marketand the influx of major into banks that market. new lending players in business articles sub-prime mortgage the Other (Harney deal 1998). Washington Post pointabout the sub-prime industry; influx the of large, high finance lenders into the market. claim to legitimacy, growth being the impetus. The same article highlighted another important werealso a technologies Lending newinspired innovation. interest where increased success, of new lending technologies can only come about in a sector which had achieved a degree of The proliferation interest. loaninflux plus from accumulated of cash: the immediate benefit the that the borrower would be able to pay off the original loan in full, while the lender was able were to borrower the and lender the for benefits The refinance. to borrower sub-prime a allowed The article was innovationspurporting within spherethe of lendingsub-prime mortgage which Washington Post lendpeople to in sub-primethe category. The openinglines of an article published by see possible to concepts”, this “new languagelinked with mortgage or newideashow about to alike because it shows that the market is achieving legitimacy. During the same period,it is borrowers to get a fair deal. The growth of the market is a good thing for borrowers and lenders marketmortgage as shown by media portray outlets these for ability the sub-prime mortgage monthly billsor even pull out some equity cash. (Harney 1998). their lower to mangled, seriously not but dented, is that credit with homeowners and borrowers for memory in opportunity best the into summer this turned have rates interest That’s because intense competition, newmortgage insurance concepts anddeclining last three years, you may be able to save some serious money in the market right now. who have taken out “A-minus” and “B” mortgages with double-digit interest in rates the if you’re one of the hundredsof thousands of home buyers with less-than-perfect credit article cited US government sponsored lenders Fannie Mae and Freddie Mac as in 1998 read 32 The The CEU eTD Collection the word ‘seemed’ indicates that this is an assumption. It can then be inferred that person can that inferred the then be that It this isanassumption. ‘seemed’ indicates word the isquoted claiming‘good economics’ that precededthe‘phenomenal whilegrowth’, their use of “‘phenomenal [seemed]growth….there tobegoodeconomics toit’” 2005). (Shecter The person largefund doubled their portfolioin market, sub-primethe mortgage claiming therethat was these mortgages is also highly profitable forlarge banks. Another article reports that another of how not securitization the report in do mentioned section Thearticles this borrowers. charge rates they that could interest because of high sector the mortgage sub-prime money off the of lendingloans topeople for high profits. Many theof articles report banksthat couldmake more in interest vested a had banks these Thus, market. mortgage sub-prime the of growth the boosted HSBC and of 2005).In TheBank Scotland”this (Morgan case, presenceof the high finance prime mortgage sector had] been boosted by the increasing presence of high street banks such as cries found incries found involving discourses growth them. literature, the overpowered frequent most of Wherethe of wereone abuse reports increased growth. saw market mortgage Despite2000). reportsof theperiodabuse, throughout between 1997 and 2006,thesub-prime subsequently defaulted on their andlost payments agreatdeal money” of (MoneyMarketing wereattracted to market, “given mortgage, alarge easeof the a the number of borrowers getting regulatory board, like the Council of Mortgage Lenders, toincrease accountability. Itnotes that grow. continued to The article this attributes tosub-primejoining anindustry-created lenders articles ofquality”, claims despite “poor industry period: loansthe these wereof that the of over the past two years. The article is interesting because it highlights a tension that persists in in early the claimeddespite2000s, that bad publicity, markethad the seen increasean in growth In ain article short An article by printed The Times Money Marketing (London), it was reported that “huge growth [in the sub- , in their series 33 In theSub-Prime ofLife which ran CEU eTD Collection companies had faced criticism for theirlending practices, Company Kensington Mortgage is a hasthat a strong trackrecord of lending”handling riskier (Ringshaw 2006).After many claimedsub-primelender Company that specialist Kensington Mortgage “iscompany a good printed inprinted trustworthy company. Evidence of this stance is seen in the articles. For example, an article tofind borrowers a advocates implicitly company one criticizing seen In amarketas legitimate, practices. market for competitive inspires legitimacy;it thecase is works of This because doubt can mortgage marketsub-prime be regardedasstatements oflegitimacy in and of themselves. a state-led project toincrease homeownership. regarding Doubts thelegitimacy fairness or the of by legitimized were time the at journalists independent by drawn being criticisms the show, will dissentin regards tothegrowth of sub-primethe market during 2006.As following the chapter them (Kassam 2006). These articles stand as a few ofmany anincreasingexpressing amountof Kings’,people or whocull profitsexcessive from sub-prime lendingand then buy Ferrari’s with afford (Financial Advisor Another 2006). criticizessub-prime lenders mortgage as being ‘Ferrari claim attacking advertising campaignswhich into borrowers coerce home loans they cannot lending company’s willingness to repossess homes (Phillip 2006). A later article made a similar growth, the article reported how lower class populations were being targeted, as well as the of sub-primethe brought it market increasingly spotlightthe under for criticism. increased With associated with the growing sub-prime market. It claimed at the end of the article that the growth legitimacy. toward claims furthers these banks’ ‘high-street reaffirming the legitimacy which economic growth indicates. The increased competition from being is quoted onlyassuming that the growth is beinginspired by economics’,‘good butis only In thesummer of 2006, The SundayTimes (London) titled “Small Mortgage Specialists Face Hard Times” The Observer (England) printed an article outlining the risks 34 CEU eTD Collection lower prices on the market. By offering, by what can be claimed to be a fair deal to the commands competition for becauseincreased market the consumer the legitimizes also article market, of the newmortgage the the1999b). While detailing competitive aspects sub-prime groups,like charge mortgage Other higherMortgage aforementionedKensington the fees (Paul “achargedflat fee of 250bps” on aflexible andmore mortgage no than onotherloans. .75% it because was besaid Group competitive to Mortgage Future market. demands of the meet the claimed thatfrom Future 1998-1999 that Mortgage Group doubled its employeehelp base to company owned by US-basedthe investmentfirm Friedman Billings Ramsey The Group. article the implications of the competitive market. It was on British lender Future Mortgage Group, a market to the forces of economics: survival of the fittest as abidlegitimacy. fittest for of the survival forces of economics: market tothe in naturemarket. of Competition thetumultuous signifiesemphasizes that the the discourse deal, which consequently legitimizes the sub-prime mortgage market, but in contrast to growth, it difference being that increased competition leads to a decrease in prices: the semblance of a fair and competition handingo handin discourse the of sub-primemarket.the mortgage The from from 2001, one 2003, one from 2004, nine from 2005, and sixteen from growth 2006. Both by year areasfollows: one from 1997, twofrom four from 1998, 1999, threefrom 2000, three 4.4 Competition ashonest. out stand within the sub-prime mortgage narrative: creating asea of doubt by which one company can company that can be trusted. It is this sense that dissent helps to legitimize growth discourse An article in article An Competition was found in forty articles, or 50% of the sample. The distribution of articles Money Marketing ’s Sub PrimeLife Series of 35 , publishedin 1999, described CEU eTD Collection consumer, amortgage in the range of 5-7% for people with were winners and there were losers, and it is possible to see here, the acquisition of of company issee here,one acquisition it losers, the to and possible were there and were winners bringing aboom in sub-primethe (Paul market.” 1999a). Forsub-prime lenders, mortgage there andto grow people whohadfinancial find will confidencedifficulties the to take mortgages, out significantgrowth opportunities in It sub-primethe market. predicts economy the will continue Square expressed its optimism in financial the whenmarket it claimed thatit believed “there are the firm Cabot Square in 1999. Citing financial difficulties as a reason for the buy-out, Cabot piece buyout the about of The an Money Store, early sub-prime lender,which was purchased by a number of articles that have cited the buyout of one firm for another. One example is a short competitive. stay to in base increaseorder their customer to corporations for these imperative itbecomehad an isbecause criteria. This about the says concrete nothing but qualify, that to those will be granted loan the that impression article the the gives met any standards; ratinghave that acreditperson qualify for this loan?’ While credithistory wasmentioned, was there nothing suggest to that the I Do categories? I fitinto these line,‘Do this they when read areflexive attitude totake expected judgments ormortgage arrearsagainst their name’” (Paul Anyone1999b). reading thearticle is Perhaps they have experience some degree of difficulty in their credit history with county court contract workersor withthose more unusualsuch employment as havingtwoor jobs.three self-employed, berecently may “‘[t]hey borrower: a sub-prime of construction conceived out of the article was a definition of “credit blips”, which are ambiguously described in a pre- person shouldmaking consider whilecompetition was at an all-time high. left Inconspicuously simultaneously claimed that this was not only a reasonable proposition for people, but aleap a Another aspect of the competitive market that deserves mention is the buy-out. Thereare isbuy-out. deserves mention the market that competitive the aspectof Another 36 less thanperfectcredit , the market , the CEU eTD Collection might be risky. However,it is notbecause of the types of businesses these companies were whilethat make companies areexpected to these investing hugeprofits,in companies these that year (Shecter 2005a). Another article, written in 2005 about the same companies, claimed Canadianthe hadmarketsub-prime grown to one-hundred and twenty billion Canadian dollars blows that youmortgage away!’” Thearticlemarket was “‘spectacular….it prime also reported glancingcompetitor Home at group, who BasedMortgage claimed that theirin share sub-the in stemsmarket The CEOs from the interest the market. entering mortgage in sub-prime the marketand entered the countries an describes from Banks interestWestern Canadian article 2005 seeking“shop aloan those encouraged to around”. customers, although itcriticizes Mortgage Kensington for using this strategy.instead It to such beneficial a rateis it of that seemed conceived asfundamentally apparent series, Libor rateis subject tofluctuations in The market. the article was in printed a “Deal Finder” a switched which torate isat set higher one-percent than (Independent Liborthe rate 2001); the interest rate of 6.75% a month, which would be fixed until after two years. The rate then in market. mortgage British the The article claimed thecompanythat monthlycould offer a examined ofloansa range Company, offered by Mortgage majorKensington a lender sub-prime something reliable andtrustworthy. achieve wasitsbalance, own market that one to tried mortgage sub-prime besaid thatthe then same as saying that market the was functioning; hidden the handis governingitshould. as Itcan by another: a winner and aloser. It gives the image of a reliable machine. An acquisition was the Between Between 2004 and increased 2005,thecompetition asmore banksin based different An article written in the in written article An DealFinder series in London’s 37 The IndependentonSunday , CEU eTD Collection agencement the market and the state take place within a closed system of social relations, the state having opportunity for lenders, growth, and competition,in terms of a state-led theory. It will show that forces. these legitimizes andconsequently discourses, doubt expressed in narrative,inthe sense,this does not dissent from embedded market business‘natural’ cycles: when supply begins to exceed demand, market the will The retract. itmarketby is that open The theclaiming mortgage to legitimizes article market. sustained article warnsthat housing the market is nearing its peak, expressing doubtin viabilitythe a of The forces inspire. market rates the that as well as competitive mortgages, the of availability toanincreasein Itcan be (Mavin bemeetthe attributed may notable payments” 2006b). to for this as “borrowers who have been encouraged to enter the market are a greater credit risk and rise in mortgage defaults, due to the growth of the mortgage market. The article cites the reason It creates the fodder for which companies can profit from further. a share of the market. Competition,in this sense, can be seen as good for the mortgage machine. sell more loans to more individuals and reap the subsequent profits; the risk was based on losing risk was largely centered in the competitiveness of the market, which was based on who could apparent that none of none of articlesthe apparent that werepurporting any opportunities in companiessub-prime mortgage generally were a safe investment. Itis very which a personmightinvest (Berman 2005). From perspectivethe offinanciers,investment in, engaged increasedmight because competition undercut profits butrather of the a company in The nextchapter will attempt tounderstand these narratives, opportunity for borrowers, An article printed in 2006 from Canada’s on the market and vice-versa. The narrative embodies neo-liberal 38 National Post inherent risk within risk industry.the In2005, noted that it was expected for a governmentality , CEU eTD Collection period. research presented does not consult individual actors, but only the artifacts leftfrom a different will be apparent, it is important to recognize that the correlation could be spurious, as the marketisprime aproduct While of increase parallel a state-ledthe homeownership. to campaign which andmarket sub-indicate isdiscourses, there the wouldthat state between a correlation articles before 1997 were not returned in the initial search. The analysis below will suggest that samplethe werepublished.It should be noted that this was notdonepurposefully; relevant Housing andDevelopment, which was in published 1995, twoyears before first the articles in outlined above will be juxtaposed with a documentfrom Unitedthe States Departmentof marketThechapter forces. legitimacy the of affirm which of governance techniques expressing 39 CEU eTD Collection 65.6% to64.1%.It then on goes fourto outline ‘fundamental benefits’ tohomeownership: society, and thatthere had been a declinesignificant in homeownership from 1980-1991: from number of recent US presidents had felt that homeownership was an essential part of a healthy (Department of Housing and Urban Development [HUD] 1995). It goes on to claim that a in psyche” American is deeply the “[t]herooted desirefor homeownership that claim The first is an introduction, which outlines the basic tenants of the policy brief. The opening lines Urban Development (HUD) is divided intosix sections, which will be elaborated upon below. they represent techniques of governance, orput another way, represent a how show to attempt in an above, chapter in the outlined themes main the with becompared will brief policy in the points main The homeowners. individual for as well as scale anationwide on National Housing Strategy healthy society. fueled by a economic processes in the conclusion. This will show that the sub-prime financial crisis was then elaborate on the implications of these government practices and relate them to long-term The United States Department of Housing and Urban Development released Development andUrban DepartmentHousing of The United States The governmentality National Housing Brief over their living environment” “Homeownership enables people to have greater control and exercise more responsibility security.” financial and…generate value in grow can that asset an in family…invests a homeownership, “Through in August 1995,which outlined the benefits of homeownership both , which considered homeownership tobe an essential aspect of a Chapter Five: Analysis andDiscussion of publishedof August 1995 by Departmentthe of Housing and 40 governmentality Urban The . Iwill CEU eTD Collection profitability. The sub-prime market in this case is the cornerstone of a state forledisof in a state market campaign case cornerstone the this sub-prime The profitability. as as legitimacy hasmarketwell potential achievedsome impression the give that the discourses corresponds to the discourse surrounding positive growth in my sample of articles. These helpsdoing so, breed acompetitive environmentand asoundeconomy (HUD 1995). This investors. The policy brief “fuels animmensely powerful engine of economic activity” andin expansion of including secondary the salemarket, the securities mortgage-backed among of how stimulating the housing economy would also help aid in job creation, as well as the discussed Growth’ andEconomic ‘Homeownership titled section The increased competition. and downturns. The nextpointin policythe brief corresponds totwo discursive features, both growth toeconomic vulnerable they are particularly because should bebalanced, borrowers low-income wealth associated with owning a home. The article also points out that the risks of giving loans to loans should be given to minorities who could potentially benefitfrom associatedthe increases in homeowners increase wealth, but also allowfor tax breaks. Itgoes on to claim that more home establishing wealth. Itdiscusses how ahome as serves a sturdy initial whichinvestment, help cites a series of statistics, as well as studies, which espouse how a home is essential for by promoted policythe brief. being tothediscourse corresponds articles in of outlined sample the strategies discursive simultaneously correspond to a few of the themes outlined in the preceding chapter. The Each of these themes are elaborated on in more detail in the rest of the policy brief. They The first section in the policy brief, titled ‘Homeownership and Wealth Accumulation’ Wealth and ‘Homeownership titled brief, policy in the section first The “Homeownershiphelps generate jobs and stimulate economic growth.” (HUD 1995) “Homeownership helps stabilize neighborhoods and strengthen communities.” 41 CEU eTD Collection promoting this market stability, marketpromoting aneo-liberal this or an ideal equilibrium. Thus, articles,the utilizing discourses of andgrowth competition are hidden hand market of the is being even allowed to ruffles,out the smoothingmarket the toward lender alike. In this case, by viewing the housing market as an engine for economic growth, the wealth creation among the lower-classes. Potential profitability affects both the borrower and the elements represented in the articles carry out a function that theoretically promotes greater self- greater promotes theoretically that afunction in out carry articles the represented elements lower-classes, the state is similarly promoting policies for greater self-policing. The discursive opportunity are alsodiscourses for good governance. By promoting homeownership for the outlined in this section are social factors of homeownership. Veiled behind discourses of neighborhood (HUD 1995). At this point, the article takes a discursive turn, because what are that of quality the preserve to wish neighborhood in a homes own that those that claim ‘neighboring’, ‘upkeep’, ‘crime prevention’, and ‘social political activism’, with the overarching residence’, of ‘length as such trends neighborhood positive with is associated homeownership titled ‘Homeownership and Stability’Neighborhood holds the answer. article The outlines how embedded deep within the American psyche, but is it a tool of governance? The next section, importance for the borrower. As the lead in line for the article suggests, itis something involvingdiscourses for opportunities the borrower, where owning ahome isof upmost claims with these associate isto possible It life,andsatisfaction.’ own ‘life homeowners in tothe regards ‘control’ increased‘self-esteem’, with is owning ahomehow associated described Well-Being’ Personal and ‘Homeownership life Thesection titled homeowners. of for whereladder, iscreation wealth a key factor. driving Miller. This technique of governance runs the gamut from the top to the very bottom of the social The policy brief discusses in detail how increasing homeownership improves the quality the improves homeownership increasing how in detail discusses brief policy The 42 governmentality as outlined above by Rose and Rose by above asoutlined CEU eTD Collection directive to increase housing among the lower classes had its impetus in the United States and in impetus increase classeshadits lower United housing the the States to among directive globalization of the sub-prime mortgage market is a product of this process. As such, the state The to nation-state. spread from nation-state them forcesto by allowing market legitimizes process of the this process by deregulating the flow of capital. The activity by theflowcontrolling of Thecapital and liberalizing trade. Bretton Woods System,it is possible to see how the state created the conditions for economic forces above itself. acting in accordance within acting a neo-liberal accordance of global capital, as well as a country’s competitiveness in the global market place. The state is selling point for global firms. In this way,both the state is legitimized by the increased presence place, acting asa in market thesell global the of securities trade through and capital creation, into capital global nationthe state itself (Fougner 2006:180).Thus thesub-primeservesbring market as ameans of to attempts state competition the Fougner, For sample. the in discourse for wealth The creation. foundation economic asound more by competitive creating makes anation-state but citizens, over control extends discoursemortgage varies little from nation nation.to Promotinghomeownership, not only classes. With Fougner and the citizens. its amountcontrol over of toextend agreater a process governance among lower-class citizens. Itcan then be said that the financial crisis was fueled by In doing so, the state contributes to the process of There are other reasons for wanting to promote greater homeownership among the lower the among homeownership greater promote to wanting for reasons other are There economization toextend across borders. Thus, the competition state governmentality competition state 43 in mind, there is a reason that sub-prime agencement as it attempts to emphasize marketemphasize asitto attempts economization follows the logic outlined in the competition state of the state is allowing the competition state . Remembering the both mirrors CEU eTD Collection as the impetus for a new market, where the process of where theprocess market, impetus for anew as the downplayed,for their capital accruing capabilities.It can then be said that the directive itself acts specifically Sassen. Within these networks, the altruistic aspects of the HUD brief were then spread globally via the digital networks by outlined Castells and Carnoy, andmore to speakof as discourse sub-prime mortgage practices which simultaneously bear the mark of governance. It is in this sense that it is possible governmentality 44 economization . madefor new market CEU eTD Collection specters of the past haunting the present. This is because the social relations surrounding the surrounding relations social the because is This present. the haunting past the of specters in the current crisis. Itis no wonder that Arrighi’s thesis contains an eerie sense of validity: the the market and the crash. But it is important to note that the processes of history have manifested different: actors assembled into different institutions,influencing each andother, creating both similar relationships were manifest among actors. The Sub-Prime Mortgage Crisis is certainly no centered on the same network of social relationships. Thus, in each epoch of financial history, ultimately but a discussion adifference of perspective, instead asserts It processes. micro samethe working are institutions, project. toward content. As it has been throughout recent history, the state and economy,if conceived as separate gaps exist,combining the narratives putforth in analysisthe showan undeniable correlation in process which can only be seen when the actors are considered together as a network. And while economization the state via a testimony, Iwould argue that no such evidence is possible. The process of isWhile there noconclusive individual evidence showingwere directly that actors by influenced an of into capital. instrument evolving networks, capital the asit travelled established became impetus for the sub-prime mortgage machine, the climate for catastrophe began to form. It that period, then it could be said that the state had a role in its own demise. In creating the of period Implicitly, this thesis has sought to overcome the break between macro processes and If we are to rememberArrighi’s thesis, that the past two global powers experience a financialization is not one which the actors conceive of as atomized individuals. Rather, it is a before collapse,and United the is that States currently experiencing Chapter Six: Concluding Remarks 45 CEU eTD Collection crisis, where its impetus stands with a seemingly benevolent ideology. benevolent seemingly a with stands impetus its where crisis, aspect that I have chosen on which to focus. In doing so, it is possible to see the makings of a the signs of this network. It is in this sense that the state is said tobear an effect, and it is this artifactsthe of their production, partof networka greater of knowledge production, whichbear Ihavedealtwith. analyzed Instead, arenot themselves actors because in thesis, expressed this their similarities, while overlooking petty differences. The nuances of the narrative are not understand to attempting conceptions, in these cohesion the show to attempted have I sentiments. role the conception financial of instruments, offinance in cultural society, and greater is time,it over which but of relationships. these alwaysanetwork actors reproduces unfolding network of associations. Large scale patterns reflect the continuity of relationships in fromgeneration have down of to an ever- capital been passed reproduction generation The articles themselves represent akind of network. 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CEU eTD Collection Colomer, Nora. 2006. “Irish RMBS Market Debuts Subprime 370m Deal.” ------. 2004. “Hong Kong Sees 1 Daley, James. 2006. “Watchdog Warns Mortgage Lenders who Prey on Poor.” Downes, Samantha. 2006. “’I Bit the Bullet toGo Sub-Prime.’” ------. 2000b. “Market Prepares for Busy Month.” Davies, Rob.2000a.“European Market GetsBusy.” Daily Telegraph 2006.“Funds(Australia). Carrying TooMuch Risk.” December(955 11. 2006. Catton, Grant. “In Long-Awaited Move, National City ExitSub-Prime.”to Downey, Kirstin. 2005. “Disparities Found in Sub-Prime Lending; Data Show African Show Data Lending; in Sub-Prime Found “Disparities 2005. Kirstin. Downey, Report November words). 22.(1021 Retrieved March 2011. ( nexis.com/ nexis.com/ nexis.com/ 10. (651 words). Retrieved March 2011. ( September 11.(652 words). Retrieved March 2011. ( nexis.com/ (London) nexis.com/ (London) words). Retrieved March 2011. 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(299 words). Retrieved March 2011. ( 2011. ( (253 words). Retrieved March 2011. ( ( 2011. ( 2011. ( Lower Rates.” at areRefinancing Customers Trading. 24% Inwall Street LenderLost Interest http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ The PhiladelphiaInquirer http://web.lexis-nexis.com/ ). 56 http://web.lexis-nexis.com/ ). ). ). http://web.lexis-nexis.com/ . July words).Retrieved7. (777 March ). http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ ). The Washington Post http://web.lexis-nexis.com/ ). The Scotsman ). ). . . ). ). CEU eTD Collection ------. 2005. “Borrowers On Time in Pricey Markets.” Kochan, Nick. 2001. “Turning Bad Credits into Profits – If Your Image of Sub-Prime is of Penal Kassam, Isabelle. 2006. “Is Your Broker Getting a Ferrari Out of Your Home Loan?; Mortgage 2005b.“Investec------. Market.” Bank October Eyes Mortgage Retrieved 25.(274words). 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Today, A Range of Loans from Kensington Mortgage Company.” Retrieved March 2011. ( http://web.lexis-nexis.com/ ). . November 6. (464 words). Retrieved March 2011. ( http://web.lexis-nexis.com/ . August01.(787 words). Retrieved March 2011. http://web.lexis-nexis.com/ ). 57 http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ The Washington Post http://web.lexis-nexis.com/ ). http://web.lexis-nexis.com/ The Mirror http://web.lexis-nexis.com/ ). The Philadelphia Inquirer Sydney Morning Herald ). ). . March 26. (749 . September. 13.(889 http://web.lexis- ). ). ). . CEU eTD Collection Money Marketing.“Sub-Prime 1998. Lender Class for Code of Ethics.” June 11.(190words). ------. 1999a.“A------. Opportunity:Sub-Prime HavingMortgageYour Application Turned Downis a 2006c.“Sub-Prime------. Still Sector Analysts:Competitive: High-Risk Mortgages: Trouble at 2006b.“Xceed------. 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Retrieved March 2011. http://web.lexis-nexis.com/ . November 29.(203 words).Retrieved March 2011. ). ). ). 59 http://web.lexis-nexis.com/ ). The Times(London). ). ). ). August 23.(154 ). http://web.lexis- The The CEU eTD Collection Ringshaw, Gran. 2006. “Small Mortgage Specialists Face Hard Times.” Phillip, Jill. 2006. “Cash: High-Risk Lenders Target Vulnerable: Firms Stand Accused of 1999c.“Money------. SoldforStore £325m.” 1999b.“In------. the Sub-Prime of Life; Mortgages Future puts its Success Down to its Paul, 1999a.“Overspent Gregor. andUnder-Lent.” O’Hara, Terence. 2005. “FBR Agrees to Buy Lender for $88 Million; First NLC Focuses on 2006c.“FSA------. Opens Campaign on LendersVulnerable.” whoTarget ------. 2006b. “Tread Carefully with Sub-Prime Specialists.” O’Connor, Rebecca. 2006a. “Primed for Top Deals.” Schiffres, Manuel.2003.“And the Winners Are…” Retrieved March 2011. ( words). Retrieved March 2011. ( (London) Retrieved March 2011. ( November words). 29.(605 Retrieved March 2011. ( words). Retrieved March 2011. ( nexis.com/ ( Observer (England) Exploiting Social Housing Tentants’ Right toBuy. Jull Phillip reports.” March 2011. ( Philosophy of ‘Innovation not Exploitation.’” June24.(789words). Retrieved Originating Mortgages.” Sub-Prime words). Retrieved March 2011. ( (5947 Words). Retrieved(5947 Words). March2011.( http://web.lexis-nexis.com/ . November words). 26.(326 Retrieved March 2011. ( ). http://web.lexis-nexis.com/ . July . July words). Retrieved30. (759 March 2011. http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ ). Money Marketing 60 http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ http://web.lexis-nexis.com/ The Washington Post Money Marketing Kiplinger’s Personal Finance The Times (London) http://web.lexis-nexis.com/ ). The Times (London) . September words). 2.(232 ). ). http://web.lexis-nexis.com/ . June 10.(593words). The SundayTimes . January 12. (636 . January 28. (524 ). ). ). 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Wallop, Harry. 2006. “ChariotLimps on After Fiery Baptism with Experts Worried About ------. 1998. “Woolwich Makes its First Move into Sub-Prime Lending Market.” Van Rihn. Nicolaas. 2000. “Sub-Prime Lenders Prey on the Unsophisticated.” Thomas, Holly. 2005. “Last-Resort Home Loan May Cost You Dear; Financial Express –Your 27. (1471 27. (1471 words). Retrieved March 2011. ( Retrieved March 2011. ( Arrears, Writes Ambrose Evans-Pritchard.” Rising Debt, One ‘Sub-Prime’ Mortgage Lender has a Third of its Borrowers in nexis.com/ Marketing ( March words).18. (671 Retrieved March 2011. ( Money.” http://web.lexis-nexis.com/ Sunday Express . May . May words).7. (247 Retrieved March 2011. ( ). http://web.lexis-nexis.com/ . May . May words). Retrieved1. (1268 March 2011. ). 62 http://web.lexis-nexis.com/ The Daily Telegraph(London) http://web.lexis-nexis.com/ ). http://web.lexis- The Toronto Star Money ). . July . ). .