American Predatory Lending and the Global Financial Crisis (2019-2020)
Ten years after the failure of Lehman Brothers – the event commonly viewed as ground zero of the financial crisis – there is still debate about the causes of the crisis and the efficacy of policy responses. However, there is little debate about the central role subprime home loans originated by mortgage brokers and banks played in the crisis.
Abusive and predatory conduct in the home loan market was a matter of concern for policymakers well before the crisis, but the Federal Reserve did not fully implement powers to regulate the mortgage market conferred on it by Congress. Many state and local governments did enact legislation in response to abusive and predatory conduct in the low- and moderate-income market by mortgage brokers and bankers.
A common explanation for federal policymakers’ failure to act and opposition to state action was a concern about creating a “patchwork quilt” of regulation that would restrict access to credit. However, state and local governments saw abuses in the mortgage market as a signal that something was wrong. This project will explore these divergent responses and the implications for preventing the next financial crisis.
This Bass Connections project will deepen the public’s understanding of the policy and market dynamics in the run-up to the global financial crisis and seek to explain the divergent responses among federal, state and local policymakers as well as the implications for preventing the next financial crisis. This objective will be achieved through a multimethod and interdisciplinary exploration of signals and stories in the run-up to the crisis.
The project team will begin by collecting and analyzing the mortgage market data available to stakeholders in the run-up to the crisis and revisiting the debate over potential legislative responses. Particular focus will be placed on public data regarding the state of the home mortgage market from 1997-2006, including (but not limited to) the size of the market, market composition, home ownership rates, default and foreclosure rates, press coverage of the mortgage market, regulatory oversight and public statement by governmental leaders about home mortgages.
Drawing on this analysis of signals, team members will collect oral histories from people on the front lines, including consumer advocates, state attorneys general and their staffs, state financial regulators, housing counselors, bankers and mortgage lenders.
The initial collection of signals and stories will focus on North Carolina, because it is home to organizations that are central to this narrative and provides the opportunity to engage with locally available resources. However, the goal is to expand from this foundation and employ an iterative data collection strategy.
Ultimately, the team’s catalogue and analysis of signals and stories will provide a comprehensive account of the state and local experience in the run-up to the crisis. This archive will be shared in a searchable format online so that it can be used by scholars, government officials and journalists wishing to supplement their understanding of the crisis and inform future policy debates.
Searchable digital archive cataloguing stories, signals and analysis related to the global financial crisis and the state of the home mortgage market from 1997-2006; chapter series or journal special issue related to data analysis and/or oral histories; short publications on The FinReg Blog detailing findings and their connection to contemporary regulatory policy debates
This team will be composed of students from a variety of backgrounds, including History, Public Policy, Law, Computer Science, Statistical Science, Economics and Sociology. Students do not need to be familiar with the causes of the Global Financial Crisis but should be broadly familiar with and interested in how financial markets work.
Students will be required to organize and critically analyze various types of information, consider multiple interpretations and varying narrative perspectives, ask and answer complicated questions using sophisticated research techniques and orally report on and discuss their findings.
Students on the team will also have the chance to engage with external organization and individuals to collect oral histories. Community partners could include community housing organizations, community development financial institutions, state regulatory agencies and former state regulators. Selected students will have the opportunity to travel.
A graduate student will serve as the team’s project manager.
In Fall 2019, this team will meet on Wednesdays from 1:10 to 3:00 p.m.
A related Data+ project will take place in Summer 2019. Participation on the Data+ team is encouraged but not required. Students interested in participating on both teams must complete applications for both the 2019-2020 Bass Connections project team and the Summer 2019 Data+ project team.
Fall 2019 – Spring 2020
- Fall 2019: Begin team meetings; review Data+ team’s analysis; identify targets and prepare for oral history interviews; conduct independent research on the legislative and regulatory changes leading up to the crisis
- Spring 2020: Begin conducting oral histories; edit and collectively review oral histories; begin development of archive and searchable digital database
Independent study credit available for fall and spring semesters; summer funding available
See related 2019 Data+ summer project, American Predatory Lending and the Global Financial Crisis (2019).
Image: Rally to demand accountability from the financial institutions and legal action against bankers, by Fibonacci Blue, licensed under CC BY 2.0
/faculty/staff Team Members
Edward Balleisen, Sanford School of Public Policy|Arts & Sciences-History*
Sara Greene, Duke Law
Sarah Bloom Raskin, Rubenstein Fellows Academy
Lee Reiners, Duke Law-Global Financial Markets Center*