The Performance of Liquidity in the Subprime Mortgage Crisis

Langley, Paul (2010) The Performance of Liquidity in the Subprime Mortgage Crisis. New Political Economy, 15 (1). pp. 71-89. ISSN 1356-3467

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Official URL: http://dx.doi.org/10.1080/13563460903553624

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
Uncontrolled Keywords: liquidity, illiquidity, subprime mortgages, performativity, risk, uncertainty
Subjects: L100 Economics
Department: Faculties > Arts, Design and Social Sciences > School of Arts and Social Sciences > Social Sciences & Languages
Depositing User: Becky Skoyles
Date Deposited: 23 Oct 2013 07:45
Last Modified: 10 Aug 2015 11:11
URI: http://nrl.northumbria.ac.uk/id/eprint/14212

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