ABSTRACT
The dominant world-narrative of the American mortgage financial crisis has been economic. Most journalists, scholars, regulators and political leaders have used financial and economic ideas to describe and explain the crisis. Most especially, the leading metaphor of the financial crisis has become ‘a bubble’, whereby rapid mortgage refinancing artificially inflated housing prices at variance with intrinsic value. Indeed, some believe that both in the US and in many other countries around the world, the rise in house prices was ‘the biggest bubble in history’.2 From this perspective, the mortgage financial crisis is presented as a result of changing conditions as though the crisis were nothing other than the result of interaction of disembodied supply and demand trends. Professor Steven Schwarcz, a leading American law professor on the topic of mortgage securitization, has argued that the mind-numbing complexity of securitization markets was one key cause of the crisis because investors and rating agencies had difficulty spotting the risks of mortgage-backed securities.3 Others have pointed to the Federal Reserve Board of Governors’ monetary policy, arguing that low prevailing interest rates created yield spreads on mortgage-backed securities that were simply too tempting to resist.4 In this paradigm the long-standing and consistent growth in American housing values created irrationally exuberant faith in the sustainability of housing prices, which in turn led to a painful market correction. The foreclosure crisis is characterized as something akin to economic weather: a naturally occurring phenomenon of market forces. At its core, this paradigm has great difficulty recognizing crime.
