In:
Politics & Society, SAGE Publications, Vol. 44, No. 1 ( 2016-03), p. 15-43
Abstract:
The period of very high foreclosure rates sets the 2007–8 financial meltdown apart from similar banking crises fueled by asset price booms. Why did the 2007–8 meltdown lead to a prolonged foreclosure crisis? Through a theoretical perspective built on Minsky’s financial instability hypothesis, Polanyi’s ideas about adverse consequences of commodity fiction, financialization of homes, and institutional coupling, I argue that commodifying houses as financial assets exposed mortgage loan holders to price fluctuations originating in capital markets and elevated their risk of default. I show how increased exposure to price fluctuations followed from the tight coupling between U.S. housing and capital markets, a coupling that resulted directly from the rising preponderance of securitization in U.S. housing finance. I provide further evidence from countries where housing finance was tightly coupled with capital markets (Iceland and Ireland) to countries where housing finance did not rely dominantly on capital markets (Canada and the Netherlands).
Type of Medium:
Online Resource
ISSN:
0032-3292
,
1552-7514
DOI:
10.1177/0032329215617463
Language:
English
Publisher:
SAGE Publications
Publication Date:
2016
detail.hit.zdb_id:
1494074-7
SSG:
3,6
