Financial Innovation, Diffusion and Institutionalization: The Case of Securitization

Workshop | 9–10 June 2016, MPIfG, Cologne
 

Outline of the Workshop

The financial debacle of 2007–9 was the crisis of a particular financial technology: secu-ritization. This technology – the bundling of financial assets (or their derivatives) into new products with seemingly less risk – purports to deliver safe investment opportuni-ties to long-term investors. Instead, securitization produced now-infamous “toxic as-sets” and drove some of the largest financial institutions in the world to bankruptcy. While securitization may result in some social welfare gains by channeling scarce capital and distributing risk, it also produces extensive losses, many of which are “socialized” through financial and monetary policies. For scholars of economic sociology and politi-cal economy, the rise and diffusion of securitization technologies therefore pose im-portant questions. Efficiency-based explanations for the spread of securitization seem inadequate. Instead, political factors, institutional constraints, and social dynamics of financial markets play a likely, but poorly understood role.
 
Indeed, securitization can be seen as a major testing ground for theories of economic innovation, diffusion, and institutionalization. Classic questions include: What is the role of the state in innovation? What explains the uneven diffusion of new technologies? In particular, how do politics, collective dynamics, and institutions mediate diffusion processes? What are the distributional stakes in these processes, and how is resistance to diffusion organized? How do politics and markets interact in the process of institutionalization? The rise, spread, and institutionalization of securitization technologies before, during, and since the financial crisis is a strategic research object for both economic sociologists and political economists.
 
The workshop will bring together a small group of international scholars doing cutting-edge work on securitization which addresses these questions. The increasing interest in financialization and the political economy of finance has led to a flourishing of research on securitization in sociology, political science, and economic geography. We will invite scholars engaged in major research projects in this area whose work speaks to the main theoretical themes.
 
The workshop will focus on the themes of financial innovation, diffusion, and institutionalization as these have played out in the context of securitization technologies.
 
First, the origins of securitization technology in its historical birthplace, the United States mortgage market, remain at best partially understood. We know that state intervention, particularly in the form of the government-sponsored enterprises Fannie Mae and Freddie Mac, was central to the genesis of the US securitization market. But the story of the full-fledged development of early forms of securitization into the complex financial technologies at the core of the crisis has yet to be told.
 
Second, securitization diffused unevenly throughout advanced capitalist economies. While countries as diverse as the United Kingdom and Spain emulated – with important variations – securitization technologies derived from those of US markets, in much of Europe securitization markets remained incipient. Why did some countries adopt US-style securitization technologies while others maintained earlier, apparently less sophisticated (but in practice more robust) technologies (such as covered bonds), or neither?
 
Third, the question of the institutional linkages between securitization and the broader financial system has gained new salience. In Europe, securitization is at the heart of the European Commission’s project of a “Capital Markets Union,” and thus a more market-based financial system. What are the implications for the regulatory treatment of the relationship between the banking and the shadow banking sector? Meanwhile, European securitization activity remains negligible compared to a vibrant US market. Which institutional factors account for this divergence? What are the politics of securitization today, and who are the potential winners and losers from the new drive towards this financial technology?
 

 

Organization and contact

Benjamin Braun

Phone +49 221 2767-536
 

 
Marina Hübner

Phone +49 221 2767-240
 

 
Tod Van Gunten

Phone +49 221 2767-524
 


MPIfG: Workshop "Financial Innovation, Diffusion and Institutionalization: The Case of Securitization" | http://www.mpifg.de/projects/financial_innovation/index_en.asp [Last updated 20.05.2016 16:12]