Creating Liquidity out of Spatial Fixity: The Secondary Circuit of Capital and the Subprime Mortgage Crisis

TLDR: In this paper, the authors investigate the institutional and political roots of the subprime mortgage crisis and examine the crucial role played by the US Treasury Department's Office of the Comptroller of the Currency (OCC) and the Department of Housing and Urban Development (HUD) in creating the polices and legal-regulatory conditions that have nurtured the growth of a market for securitizing subprime loans.

Abstract: Since the classic work of Henri Lefebvre and David Harvey, the ‘secondary circuit of capital’ has been a focal point for debate among critical urban scholars. Against the background of contemporary debates on financialization, this article investigates the institutional and political roots of the subprime mortgage crisis. Empirically, the article situates the current turmoil of the US mortgage sector with reference to a series of ad hoc legal and regulatory actions taken since the 1980s to promote the securitization of mortgages and expand the secondary mortgage market. Securitization is a process of converting illiquid assets into transparent securities and is a critical component of the financialization of real estate markets and investment. Specifically, I examine the crucial role played by the US Treasury Department's Office of the Comptroller of the Currency (OCC) and the Department of Housing and Urban Development (HUD) in creating the polices and legal-regulatory conditions that have nurtured the growth of a market for securitizing subprime loans. Theoretically, the article examines the subprime mortgage crisis as an illustration of the contradictions of capital circulation as expressed in the tendency of capital to annihilate space through time. Resume Depuis les travaux de reference d’Henri Lefebvre et de David Harvey, le ‘circuit secondaire des capitaux’ a suscite de nombreuses discussions entre specialistes critiques de la ville. Avec en toile de fond les debats contemporains sur la financiarisation, cet article etudie les racines institutionnelles et politiques de la crise des subprimes . Sur le plan empirique, il situe le bouleversement actuel du secteur americain des prets hypothecaires par rapport a une serie de mesures de Droit et de reglementations specifiques adoptees depuis les annees 1980 pour promouvoir la titrisation et le marche secondaire des credits hypothecaires. La titrisation, qui permet de convertir des actifs peu liquides en valeurs mobilieres transparentes, est une composante essentielle de la financiarisation de l’investissement et des marches immobiliers. Une attention particuliere est accordee au role crucial qu’ont joue, aux Etats-Unis, l’autorite de surveillance des banques relevant du ministere des Finances (OCC), ainsi que le ministere du Logement et de l’Urbanisme (HUD), dans la creation des cadres et des conditions juridico-reglementaires qui ont nourri l’essor du marche de la titrisation des prets hypothecaires a risque. Sur le plan theorique, l’article analyse la crise des subprimes comme une illustration des contractions de la circulation des capitaux, ces derniers tendant a aneantir l’espace par le temps.