Sucker Punched by the Invisible Hand: The Spread of the Worldwide Financial Crisis, 2007-2010
The worldwide financial crisis of 2007-2010 was set off by the collapse of the subprime mortgage market in the U.S. and caused widespread banking failures and worldwide recession. Why were Western European countries so susceptible to the housing price downturn? Neil Fligstein will explore various mechanisms by which the financial crisis might have spread. The result is surprising: European banks went down because they had joined the market in the U.S. for mortgage backed securities and funded them by borrowing in the asset-backed commercial paper market. They were pursuing the same strategies to make profit as the American banks in the same markets. This suggests that subsequent studies of global finance and financial markets need to know something about the identities and strategies of the banks that structure the main markets for different products.
Professor Fligstein is the Class of 1939 Chancellor's Professor at the University of California Berkeley. In addition to a sociology professor, he is also the Director of the Center for Culture, Organization and Politics at the Institute for Research on Labor and Employment.
This lecture is part of our newly established lecture series The WZB Distinguished Lectures in Social Sciences.