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The performance of liquidity in the subprime mortgage crisis.

Langley, P. (2010) 'The performance of liquidity in the subprime mortgage crisis.', New political economy., 15 (1). pp. 71-89.

Abstract

‘Liquidity’ is highly significant to representations of the crisis that gripped financial markets from the summer of 2007. A wide-ranging ‘liquidity crisis’ is typically traced to the collapse of prices in markets for assets backed by or derived from the repayments of American subprime mortgagors, while public authorities are said to have responded by ‘restoring liquidity’ to markets in these now ‘distressed’ and ‘toxic assets’. Here the category of performativity is developed to enable a critical investigation of liquidity. The performance of liquidity in booming subprime markets is shown to have turned on the affirmation and exemplification of wider norms present in wholesale asset markets, and upon specific calculative and emotional valuations of risk through underwriting procedures, bond rating and hedging. However, the performance of liquidity contained its other, illiquidity, and this surfaced in subprime markets because asset prices symbolised risk valuations which could not capture incalculable future uncertainties. As the crisis broke, talk of liquidity and illiquidity licensed particular policy responses and closed down wider political debate.

Item Type:Article
Additional Information:Special Issue: The Political Economy of the Subprime Crisis: The Economics, Politics and Ethics of Response.
Keywords:Liquidity, Illiquidity, Subprime mortgages, Performativity, Risk, Uncertainty.
Full text:(AM) Accepted Manuscript
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Status:Peer-reviewed
Publisher Web site:http://dx.doi.org/10.1080/13563460903553624
Publisher statement:This is an electronic version of an article published in Langley, P. (2010) 'The performance of liquidity in the subprime mortgage crisis.', New political economy., 15 (1). pp. 71-89. New political economy is available online at: http://www.tandfonline.com/openurl?genre=article&issn=1356-3467&volume=15&issue=1&spage=71
Record Created:06 Sep 2013 14:20
Last Modified:06 Sep 2013 16:27

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