The 2007-2009 financial crisis was centered on the mortgage industry.
This paper develops a distinctly sociological explanation of that crisis
based on Fligstein’s (1996) markets as politics approach and the
sociology of finance. We use archival and secondary sources to show that
the industry became dominated by an “industrial” conception of control
whereby financial firms vertically integrated in order to capture
profits in all phases of the mortgage industry including the production
of financial products. The results of multivariate regression analyses
show that the “industrial” model drove the deterioration in the quality
of securities that firms issued and significantly contributed to the
eventual failure of the firms that pursued the strategy. We show that
large global banks which were more involved in the industrial production
of U.S. mortgage securities also experienced greater investment losses.
The findings challenge existing conventional accounts of the crisis and
provide important theoretical linkages to the sociology of finance.
Fligstein, Neil (CASBS Fellow 1995); & Goldstein, Adam. (2012). The Transformation of
Mortgage Finance and the Industrial Roots of the Mortgage Meltdown. UC
Berkeley: Institute for Research on Labor and Employment. Retrieved
Download full pdf publication: The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown