Subprime Cities: The Political Economy of Mortgage Markets

There have been numerous explanations of the US subprime mortgage crisis and its impact on the global economy. Subprime Cities adds to the literature by considering the “crisis” as a symptom of the failings of the capitalist system. Through their critique of capitalism in the longue durée, the authors are able to provide a set of insights that are often missing in those studies that focus mainly on the role of USA government policy-makers and the banking system. The collection, therefore, provides an alternative viewpoint to the mainstream explanation of the subprime crisis that has gained a foothold of late. The mainstream view of the crisis is that “deregulation” policies made it possible for banks to transform mortgage default risks by “bundling up” mortgage and other non-standard assets into “liquid” securities that could be exchanged on the global finance markets. This bundling-up, often termed “securitization”, meant that profits could be made with little regard as to whether or not borrowers could repay their loans. In short, the cause of the global financial crisis is explained as being a consequence of maladministration, abetted by compliant policy-makers who caved into the demands made by Wall Street lobbyists.