ABSTRACT
This chapter explores system conditioned risk calculations in more detail, focusing on the US mortgage market, arguing that it needs to be understood in terms of sequential movement through phases of risk management that are reminiscent of hedge, speculative and Ponzi financing arrangements. Before moving on to discuss the emergence of three phases of risk, including risk screening, risk management and risk transfer, in the US mortgage market, the chapter explores how mortgages are situated in and conditioned by a system of liquidity. This illustrates the problem of applying a Minskyian analysis to contemporary instances of crisis by exploring the problem of the identification of Ponzi finance units in the context of risk transfer by considering the context in which the hybrid adjustable rate mortgage (ARM) emerged. The hybrid ARM, the mortgage instrument by which Mozilo sought to democratise finance, was developed through the extension of derivative-based thinking to mortgage finance in the sub-prime market.
