Subprime Nation

9780801448126: Hardback
Release Date: 20th August 2009

9780801475672: Paperback
Release Date: 20th August 2009

Dimensions: 156 x 235

Number of Pages: 280

Edition: 1st Edition

Series Cornell Studies in Money

Cornell University Press

Subprime Nation

American Power, Global Capital, and the Housing Bubble

In his exceedingly timely and innovative look at the ramifications of the collapse of the U.S. housing market, chwartz makes the case that worldwide, U.S. growth and power over the last twenty years has depended in large part on domestic housing markets.
Hardback / £73.00
Paperback / £22.99

In his exceedingly timely and innovative look at the ramifications of the collapse of the U.S. housing market, Herman M. Schwartz makes the case that worldwide, U.S. growth and power over the last twenty years has depended in large part on domestic housing markets. Mortgage-based securities attracted a cascade of overseas capital into the U.S. economy. High levels of private home ownership, particularly in the United States and the United Kingdom, have helped pull in a disproportionately large share of world capital flows.

As events since mid-2008 have made clear, mortgage lenders became ever more eager to extend housing loans, for the more mortgage packages they securitized, the higher their profits. As a result, they were dangerously inventive in creating new mortgage products, notably adjustable-rate and subprime mortgages, to attract new, mainly first-time, buyers into the housing market. However, mortgage-based instruments work only when confidence in the mortgage system is maintained. Regulatory failures in the American S&L sector, the accounting crisis that led to the extinction of Arthur Andersen, and the subprime crisis that destroyed Lehman Brothers and Merrill Lynch and damaged many other big financial institutions have jeopardized a significant engine of economic growth.

Schwartz concentrates on the impact of U.S. regulatory failure on the international economy. He argues that the "local" problem of the housing crisis carries substantial and ongoing risks for U.S. economic health, the continuing primacy of the U.S. dollar in international financial circles, and U.S. hegemony in the world system.

"Herman Schwartz has written an ambitious and important book that offers a 'unified field theory' of political economy to explain the U.S. housing boom, the mortgage crisis, the U.S. dependence on high levels of foreign capital, and the changing global balance of power among nations. His argument is surprising and controversial, but it is supported by data and by a deep immersion in several relevant literatures."—Fred Block, Contemporary Sociology

"Of the dozens of serious books that examined the determinants of the 2008 financial crisis, Herbert M. Schwartz's Subprime Nation: American Power, Global Capital and the Housing Bubble stands out for its sharp take on the large macro flows that ultimately led to the collapse of financial markets and real economies around the world. Now four years after the collapse of Lehman Brothers and three years after Schwartz’s work was first published, it is worth a second look. . . . Few books or articles written in the immediate aftermath of the 2008 crisis could hold up as well."—Siona Listokin, Journal of Planning Education and Research (September 2013)

"This stunning book is undoubtedly one of the most important and innovatory studies of American power."—Ronen Palan, University of Birmingham

"In Subprime Nation, Herman M. Schwartz brings his characteristic iconoclasm to the deep roots of the current international economic crisis. He investigates how the assertion and extension of American economic power led to the boom in American financial and housing markets, which set the stage for the crisis. The book provides a detailed, sophisticated analysis of the sources of global financial flows and their impact on America's international economic and political position."—Jeffry Frieden, Harvard University

"Subprime Nation makes it clear why we need the field of International Political Economy. Only someone with Herman M. Schwartz's breadth of historical knowledge and familiarity with the intricacies of international financial flows and the contextually specific motivations of political leaders in a dozen countries could have developed such a convincing explanation of the current global economic crisis. Ultimately, it is a story about power: about power that the United States (perhaps unexpectedly) held until 2008, and about the power of those, around the world, who benefited from the peculiar global economy of the 1990s, and who, Schwartz worries, may not be willing to give up their advantages that must be given up for the crisis to end."—Craig N. Murphy, M. Margaret Ball Professor of International Relations, Wellesley College