ABSTRACT
Analyzing the foundations of the subprime crisis going back to 2007 may be an interesting way of looking at American capitalism, since it reveals some aspects that are often hidden, such as the indirect role of the federal state in housing mortgage lending. American capitalism may not be the free market economy that some have described (Hall & Soskice, 2001). Banks that used to finance mortgage lending through the deposits they received from their customers have moved to a new model in which they sell on mortgages to the bond market. Given the dynamism of the bond market, banks did not really carefully check the financial capacity of American borrowers. They were also encouraged to increase mortgage lending under the Community Reinvestment Act (1977), 1 as part of a government effort to fight against redlining in ethnic and racial neighborhoods. Useful to remember is the fact that in 2007 the mortgage bond market represented $6 trillion and was the largest single part of the whole $27 trillion US bond market, bigger even than Treasury bonds (BBC News, 2007).
