The geographies of securitisation and credit scoring
Thomas Anthony Wainwright, BA, MSc
Thesis submitted to the University of Nottingham
for the degree of Doctor of Philosophy
School of Geography
Abstract
This thesis draws upon contemporary research in economic geography and the social sciences to explore the spatial relationships that exist between residential mortgage lenders, investment banks and investors and the subsequent geographies that are produced through these intertwined networks. The research is informed through empirical material collected through semi-structured interviews with directors and associates working in the financial sector to see how consumer mortgages are produced and restructured into debt securities. There is a particular focus on how the UK financial sector has undergone restructuring, as a consequence of the politics of financialisation since the 1990s, which aligned the residential mortgage market with the circuits of international capital. The thesis examines three areas of banking and finance to comprehend how retail mortgages have become embedded within international finance. First, the thesis explores how deregulation in the UK initiated a spatial reorganisation of mortgage production networks and funding. Second, the research investigates the migration and adoption of automated decision-making technologies, highlighting how these devices have reshaped the geographies of banking, and are inherently geographical themselves. Third, the thesis focuses on how mortgages are (re)engineered into debt-securities, with a particular focus on how geography is used to mitigate credit and tax risks. It is argued that the restructuring of the UK retail sector and its increased integration with the international circuits of capital exacerbated the exposure of the UK‟s economy to the effects of the international credit crunch. Furthermore, the thesis underlines the effect of geography which has shaped the adoption, of new financial technologies and strategies, through local regulations, epistemic cultures and histories.
Contents
Abstract i
Acknowledgements ii
Contents iii
List of tables vi
List of figures vii
Chapter 1: Introduction
Chapter 2: Financialisation(s) and monetary forms
2.1 Introduction 16
2.2 Adding it all up: the theoretical and philosophical narratives of money 20
2.2.1 Money and the political economy 23
2.2.2 Anthropological and social accounts of money 32
2.3 The liquidity of financialisation: flows of money and tides of change 44
2.3.1 A political economy of financialisation 45
2.3.2 Financialisation and the cultural-economy 52
2.4 Conclusion 56
Chapter 3: The geographies of money: spaces of monetary circulation
3.1 Introduction 60
3.2 Making (and breaking) a geopolitical economy 63
3.3 Financial centres: (re)assembling the pieces 66
3.4 Restructuring space: retail banking and (de)centralisation 73
3.5 Conclusion 79
iv
Chapter 4: Hide and seek?: Investigating the financial elites of UK mortgage production and securitisation
4.1 Introduction 82
4.2 Choosing the right tools for the job: Qualitative research methods 84
4.3 Situating the research: the geographies of securitisation and credit scoring 90
4.4 „Finding‟ elites and practicing research 91
4.5 Conclusion 106
Chapter 5: (Re)building mortgages: The geographies of credit production by UK lenders
5.1 Introduction 108
5.2 (Re)placing the „global‟ city: Financial power and asset production in the periphery?110
5.3 Sowing the seeds for growth: A history of mortgage finance 115
5.4 Centralisation: Restructuring the UK mortgage market 120
5.5 Conclusion 138
Chapter 6: Accept(ed), Reject(ed), or Refer(ed)?: The uneven geographies of credit information and automation
6.1 Introduction 141
6.2 What is „credit scoring‟? 145
6.3 The origins and geographies of credit scoring 152
v
6.4 Tracing the source of credit scoring‟s power 158
6.5 Raising (and lowering) the bar: the production, evaluation and maintenance of score(card)s161
6.6 The uneven geographies of credit data 174
6.7 Conclusion 179
Chapter 7: (Re)structuring and the spaces of RMBS production
7.1 Introduction 182
7.2 Interfaces, boundaries and expertise 184
7.3 Securitisation: building a transaction structure 192
7.4 Securitisation: building the waterfall structure 203
7.5 Conclusion 215
Chapter 8: Conclusion
8.1 The beginning of the end 219
8.2 Empirical contributions of the research 221
8.3 Contributions to economic theory 228
8.4 Contributions to economic geography 231
8.5 Research limitations 233
References 237
Appendix 1: Interviewees 258
vi
Chapter 8
Conclusion
“Political leaders, and their opponents, like to pretend that they are still in control of their national economies, that their policies have the power to relieve unemployment, revive economic growth, restore prosperity and encourage investment in the future. But recent years have shown again and again how the politicians‟ plans have been upset by changes that they could have not foreseen in the world outside the state,” (Strange 1986:3).
8.1. The beginning of the end Despite being written over 20 years ago, the quote from Strange, above, is startlingly accurate in describing the political response to capitalism‟s latest crisis, the credit crunch. Strange stresses how politicians consistently fail to foresee financial crises and that once capitalism begins to shudder from its insurmountable, internal contradictions, politicians around the globe struggle to successfully overcome the effects of financial crises. As discussed in the introduction to the thesis, the UK‟s experience of the credit crunch was caused by the illiquidity of the capital and interbank markets, a consequence of the US subprime market, and, in a way that supports Strange‟s argument: beyond the UK‟s jurisdiction. It can be argued that the British government - along with the financial services sector – was slow to foresee and acknowledge the potential effects of the credit crunch, unfolding beyond its shores. As late as July 2007, newly appointed British Prime Minister Gordon Brown was calling for banks to increase their use of structured finance products, and their dependence on the international capital markets, to fund 25 year fixed mortgages to aid first time buyers57. By September, a few months later, the government had begun to prepare for the nationalisation of Northern Rock, the first of several high-profile fatalities within the UK‟s financial sector.
Aalbers (2008) has suggested that capital market funding can increase house price inflation, and in the case of the UK, the expansion of securitisation over the past decade has coincided with substantial house price increases. Between 1997 and 2007 the average price of a UK house rose by 193 per cent as the UK‟s mortgage industry and consumers alike had become financialised58 . Consumers enjoyed the substantial growth in house prices, becoming real estate speculators, selling their homes to buy a larger house as an investment, or by unlocking capital by releasing equity from their homes (Langley 2008), while the management of the UK‟s retail and investment banks received large cash and stock bonuses, with institutional investors enjoying the high-dividends from UK banks.
The effects of the credit crunch unravelled rapidly within the UK with disastrous repercussions for the banks, prior to the contagions that spread throughout the economy, affecting large industrial producers through to small family businesses and high-street consumers, a consequence of the enhanced exposure of the UK‟s financial institutions to the volatility of the international financial system. This exposure – repositioned through securitisation and interbank lending - had been steadily growing as a response to series of events, beginning with financial deregulation in the 1970s and 1980s. This deregulation indirectly stimulated the spread of new financial technologies from the US, including securitisation, and business models such as centralised lenders. The implementation of these new ideas and knowledges began to integrate the UK‟s financial institutions, in particular mortgage lenders, into the international financial system through its reliance on international capital to fund the UK mortgage market. This fundamental shift was to have serious implications for the UK economy, which regulators failed to acknowledge and plan for. This final chapter will now summarise the key empirical findings of innovations, developments and geographies that supported the growth of the UK mortgage market; how the findings from the research can be used to inform the theories and philosophies which this thesis has drawn upon; and the contributions of the thesis to the wider debates ongoing within economic geography.
8.2. Empirical contributions of the research
The empirical contributions offered by the thesis concern the fluid geographies of UK mortgage production, that are shaped through the production of credit scoring technologies and the securitisation of mortgage assets into RMBS bonds, central to understanding how contemporary mortgage production is performed and financed. Chapter 5 highlighted how deregulation in the 1980s witnessed the emergence of new types of mortgage providers, instigated through financial restructuring that was stimulated by The Financial services Act (1986) and The Building Societies Act (1986). These two Acts allowed building societies to transfer their mutual status to that of a bank, an option mainly exercised during the 1990s, allowing them to access interbank money markets, and later securitisation, allowing mortgage banks to expand their mortgage portfolios and increase their profits. In addition, the deregulation made it legal for banks to issue residential mortgages, while centralised lenders began to enter the residential mortgage market. The thesis discussed how the geographies of mortgage funding became spatially reconfigured, and in so doing addressed the second and third research questions which concerned the geography of mortgage production and how this geography has become transformed. In particular, the research has illustrated how the localised circuits of mortgage funding became integrated with the international capital markets as different types of mortgage lenders accessed their mortgage funding through the interbank and international capital markets.
Since The Financial Services Act and The Building Societies Act were both passed, the UK mortgage market has undergone a series of dramatic transformations. The introduction of new technological infrastructure, such as credit scoring, discussed in Chapter 6, restructured the geographies of mortgage production, as the importance of branch networks declined. The thesis discussed, in Chapter 5, how mortgages were traditionally underwritten by the branch manager of a building society, and later bank managers as banks entered this market, but credit scoring technologies initiated a redistribution of financial power as the decision-making procedures were automated and moved to specialised centralised, processing centres. Subsequently, a geography of centralised processing centres emerged, which arguably exercise the power to financially include or exclude UK consumers from housing credit. This geography is dispersed across the UK, a pattern that was explained through the particular geographies and histories of the three different types of mortgage lenders: building societies, centralised lenders and retail banks. Building society processing centres are located close to the building society headquarters in order to exercise control over the centre, but also as there is no clear advantage to locating further away from their headquarters and their regional market, a geography that is reinforced by the historical locations of building society headquarters that are distributed around the country. The location of retail bank processing centres are more widely distributed which can be explained by the national scale on which they operate, compared to building societies that have a tendency to be regionally concentrated, so are more likely to locate their processing centres in areas that have low operational costs, or because they have inherited a processing centre from another financial services provider which they have acquired. Centralised lender processing centres are distributed throughout the UK to benefit from low operational costs, while their locate headquarters are more often than not located in London as it provides them with access to the capital markets, law firms and investment banks as they are reliant on securitisation. The contemporary geography of mortgage processing is dynamic and will continue to change in response to regulatory transitions and technological innovations. It is also likely that the current credit crunch may initiate a new phase of restructuring, as Santander, the owner of Abbey, begins to streamline its processing operations following its purchase of Alliance & Leicester and the branch network of Bradford & Bingley. The Lloyds Group may seek to reduce the number of HBOS‟s processing centres, which will reshape these geographies – an area of potential further research.
Mortgage lenders were only able to centralise their operations through the adoption of credit scoring, a decision-making technology imported from the US to the UK. The development of credit scoring, and its adoption within the UK, was explored in Chapter 6, which sought to explore the internal workings of credit scoring. In doing so, this thesis identified how scorecards develop and exercise their power through the alignment of heterogeneous materials and human relations to develop power asymmetries. The scorecard becomes an obligatory passage point that provides access to credit, for those who desire it, through the practice of surveillance and the encoded performance of epistemic knowledges through software operated through the centralised processing centres. The research also identified how proponents of ANT have a tendency to fixate on a network‟s attempt to enrol actors. However, credit scoring, as an actor-network, actively seeks to exclude specific actors that bear particular, undesirable attributes that are judged to represent a consumer who is a „bad‟ credit risk from joining the network of the financially included.
Chapter 6 sought to examine the processes used to develop scorecards, in order to highlight and acknowledge how human expertise, embedded within epistemic communities is responsible for developing the codes used by credit scoring software. This revealed that although credit scoring is automated and its construction is primarily derived from quantitative epistemologies, it is fundamentally reliant on social judgements, knowledges and the experience of credit analysts. It was also uncovered how the spaces of financial inclusion and exclusion are fluid and vary temporally as the capability of scorecards to accurately discriminate consumers into the categories of „good‟ and „bad‟ consumers varies overtime, as scorecards become outdated. As such, the predictive ability of scorecards to identify „good‟ and „bad‟ consumers fluctuates, which reshapes the spaces of financial inclusion and exclusion before the scorecards are adjusted or replaced.
I also highlighted the geographies of credit data in Chapter 6, which emphasises how credit data is subject to varying combinations of self-regulation by consumer credit lenders and the specific legislation of particular nation-states in which they reside. The range of available consumer data attributes and the richness of this information is also governed by the history and development of a country‟s consumer credit market which generates the credit data that can be used in credit scoring. Countries, whose consumer credit markets are established, enable the financial services industry to amass substantial longitudinal databases of consumer data, and analysts argue that these larger, historical datasets assist them in producing more predictive scorecards. This thesis‟ examination of credit scoring, and the consumer data used in underwriting, was used to view how credit data was misused in the US context of subprime lending, which illustrates how the data used in credit scoring and underwriting are open to abuse. While the research focussed on the development of scorecards prior to the crunch, this raises new questions as to how new credit scoring products and technologies may be utilised to aid mortgage lenders in identifying consumers that are likely to default during the credit crunch. This also raises additional questions as to how the credit crunch will affect the credit records of individuals, with increases in missed payments and defaults. It is likely that an increase in adverse credit data will result in increased application rejections within the prime mortgage industry, which may signal an increase in demand for subprime products from previously prime customers, providing there is a subprime market with enough capacity to meet demand, an important area of potential future research.
Detailed empirical research that has focussed on securitisation in the UK has been limited to the work of Pryke and Whitehead (1994) who viewed securitisation as a mechanism to invest capital into the built environment, and of Langley (2008), who examined how consumers have become embedded into high-finance through securitisation. In contrast, this thesis embarked on a detailed examination to understand how individual mortgages are converted, through securitisation, into bonds, with a focus on the roles performed by different epistemic elites who reengineer the income streams from mortgages to produce bonds and succeed in reducing the exposure of the transactions to taxation. The initiation of securitisation, despite being coordinated by mortgage lenders, occurs on the boundaries of the lender, where it interfaces with the epistemic elites of investment banks, corporate service providers and law firms.
The research identified the two main ways in which the financial service providers necessary for the production of RMBS were chosen by mortgage lenders. First, lenders chose the companies that they had successfully used on previous securitisation transactions. Second, the lenders would draw upon the broader experience of service providers that have been involved in successful securitisations with other lenders. The thesis investigated how deregulation and the „Big Bang‟ led to the transference of securitisation from the US to the UK, through investment banks, which imported the idea of securitisation into the City and introduced and nurtured the formation of new epistemic elites who began to perform securitisation in the UK for mortgage lenders. The role of London‟s prominent law firms in securitisation was also highlighted, in addition to the importance of their clustering within London, which has fostered the development of legal epistemic elites, who interpret alterations to UK legislation that has proven instrumental in the adaption and performance of securitisation within the UK.
One of the key findings of the research was the identification of the role of SPVs that insulate mortgage lenders from credit risk, reduce the regulatory capital reserves of mortgage lenders, as well as reducing the effect of tax liabilities on the revenue streams involved in the transaction to ensure that RMBS bond holders are repaid in full. This finding drew attention to the use of financial structures - used in the performance of a securitisation - that are constructed by law firms and managed by corporate service providers. Chapter 7 illustrated how the legal status of charitable trusts are mobilised by law firms to minimise the tax liabilities that affect securitisations reducing the likelihood that changes in taxation rates will reduce the repayments in RMBS investors. In turn, this has produced a concentrated geography of RMBS SPVs. A synthesis of the variations between different political economies and their particular tax regimes has developed an enclave of UK mortgage assets in London, where billions of pounds of residential are associated with companies registered at a few select addresses, at the offices of corporate service providers.
The thesis sought to replicate the sociological analysis used by academics that investigate the performance of financial markets (for example, Knorr-Cetina and Bruegger, 2002; Maurer, 2001; and Pryke and Allen, 2000) to develop an understanding of how consumer income streams are restructured in the performance of securitisation. The structuring of RMBS transactions has spatial implications, and the spatial attributes of mortgage assets are encoded into waterfall structure models. This is to attempt to protect the investors of RMBS mores from disproportionate concentrations of credit risk from consumers concentrated in particular regions. During the research it was also discovered that while bond-rating agencies provide financial governance through the production of risk metrics, the use of their bond-rating methodologies by RMBS structurers to perform securitisation, has embedded the knowledges of bond-rating agencies indirectly into the waterfall structures of RMBS production, which has extended their role from governor to structurer, which raises questions surrounding the independence of their metrics. Bond-rating agencies have received substantial criticism from the financial media since the credit crunch, and this thesis suggests that new modes of governance may emerge to supplement the role of the three main bond-rating agencies, an area for further research to understand new modes of governance that may emerge from the crisis.
8.3. Contributions to political economic theory
The thesis engaged with the diverse and contested narratives written on money and its value(s), discussed in Chapter 2, to explore the origins and intellectual traditions that seek to understand money and credit, in order to contextualise the theorisations that can be used to comprehend the role of RMBS notes in the economy. The thesis examined Marx‟s early work, drawing on that of Smith (1976 [1776]) and Ricardo (1951), to develop an extensive understanding of monetary theory, where the value of money is derived from the human labour embedded in material objects based on the labour theory of value. Marx provided early theorisations of credit, later expanded upon by Harvey (1982), to explain how the value of credit money reflects the, perceived, future value of labour, not yet exploited by capitalists. This is important for understanding RMBS notes as a form of credit money, as illustrated in Chapter 7, which is used by retail banks and centralised lenders to allow them to continue their mortgage lending and to accumulate additional profits. However, instead of using the capital to buy fresh means of production, mortgage lenders use the money exchanged from their credit notes to produce new mortgage assets. This theorisation of RMBS complements Marx‟s, and Harvey‟s, arguments on understanding the role of credit money in contributing to financial crises, when mortgage lenders develop fictitious capital through the issuance of RMBS notes. When these notes are overproduced by unscrupulous issuers, such as US subprime lenders, where there is little chance of the notes being repaid, the value of the notes is reduced as they are shunned by investors, as witnessed during the credit crunch. This leads to the notes becoming devalued, creating a crisis of trust for credit money in general as investors return to assets bearing less risk (Harvey 1982).
Criticisms by Simmel (2003[1907]) and Weber (1968) have sought to undermine Marx‟s labour theory of value, instead pointing to other ways in which money derives its value, where people value an object based on the quantity of money they believe is necessary to exchange for an object. The thesis sought to determine the particular sociological origins of „value‟ that exist beyond the materiality of money‟s form, which can be used to understand the value behind RMBS notes, as the labour theory of value is not compatible with the development of RMBS notes as no material labour is exerted on an underlying commodity. Instead, the thesis contributes to debates on how the production of value is achieved through calculative practices performed by epistemic elites to understand how money and credit can be conceptualised. Social scientists have focussed on the assemblages of elites, knowledges, objects and technology which highlight the importance of the relationships between human and non-human actors (Pryke and du Gay 2007) in the production of money and credit. This thesis provided insight into how money can be considered to be a symbolic cultural artefact that is culturally formed through conventions and social interactions (Maurer 2006) through the use of computers, knowledges and bond-rating manuals used to develop waterfall structures and RMBS notes that circulate amongst investors as money. The research demonstrated how value can be produced through trust and calculative technologies developed, contributing towards theories of money within economic geography and the wider social sciences.
The thesis has also contributed to the ongoing work on financialisation that has begun to gain momentum within the wider social sciences but also within economic geography. In drawing attention to financialisation‟s contested past, the review in Chapter 2 outlined how financialisation comprises of a series of different discourses which operate in a multitude of different spaces. This thesis has contributed to the debates surrounding financialisation by outlining some additional spaces where financialisation is active, but also how specific actors modify particular spaces so that they become compatible with the politics of financialisation. Financialisation‟s politics have come to focus broadly on the spectre of shareholder value (Froud et al. 2000), in particular, the increased pressure of institutional investors on companies, including banks and mortgage lenders, to increase their profits through modifying the corporate behaviour of managers.
This thesis argues that the politics of financialisation contributed to the transformation of the UK mortgage industry to increase its profitability. Chapter 5 outlined the strategies used by mortgage lenders which have included bank mergers, centralisation, credit scoring and the development of programmes that would enable them to access the interbank markets through securitisation. The deregulation of the UK mortgage market combined with demutualisation, the entrance of publically owned mortgage lenders that were owned by shareholders in the 1990s witnessed the financialisation of the UK mortgage market, as building societies - that redistributed their profits to their members – lost their monopoly on the mortgage market to retail banks and centralised lenders who passed their profits to their shareholders. In this sense, the distinctive non-capitalist segment of consumer lending which used regional circuits of capital became assimilated within the international circuits of capitalist accumulation.
Chapter 6 examines the development of consumer subjectivities through credit scoring that expands on the work of Langley (2006; 2007) who has explored how the government is attempting to equip consumers with the ability to regulate their bodies and thoughts through financial literacy. The aim is to produce responsible investors that are able to protect themselves as the welfare state is withdrawn, by investing their own financial resources into pension funds and unit trusts. The research in Chapter 6 on credit referencing agencies draws attention to the way in which credit referencing agencies produce and store consumer subjectivities, which act as private disciplinary technologies that govern the behaviour of consumers. This has emerged as consumers are able to check their credit records and are increasingly made aware, through the media, as to how their credit data will affect their future ability to access credit, which contributes to the performance of self discipline, prudence and planning by consumers.
8.4. Contributions to economic geography
Finally, the research has focussed on the role of financial centres, central to the circulation of international financial capital. London‟s reputation as an international financial centre was damaged after the second world war, but its prestige returned as a result of the burgeoning euro money markets but also as sweeping regulatory changes in the 1970s which witnessed an expansion of the operations of resident US investment banks in the City while UK merchants banks moved into investment banking (Plender 1986). Epistemic elites has become increasingly more important to economic geographers as they have begun to study the role of elites and the uneven geographies that they produce (Schoenberger 1991). This research has argued that the historical legacies of London have contributed to the embedding of securitisation in the City, by nurturing the development of new epistemic elites, working practices and education (Hallsworth and Skinner 2008) that not only displaced the old „gentlemanly capitalism‟, but introduced new financial knowledges and products. In this thesis I have also drawn attention to the importance of proximity between mortgage lenders, lawyers and investment bankers, in order to initiate securitisation transactions. Geographical proximity is necessary to draw upon the different skills and knowledges required to perform securitisation, but also to circulate new ideas amongst these elites as they continue to develop new innovations.
The research has also expanded on geographical research and the role of financial centres at the regional level. While there has been a tendency to focus on global financial cites (Amin and Graham 1997; Robinson 2006) this thesis has acknowledged research that has been conducted on smaller regional centres that act as processing spaces for financial data (Leyshon et al. 1989; Richardson and Marshall 1999; Bailey and French 2005). However, this thesis has attempted to highlight the role of what it argues are powerful, regional financial centres, that are linked to London and the international financial markets through securitisation. The research in Chapter 5 argues how these centres of underwriting exercise financial power through scorecards, which in turn are determined by financial elites that financially include and exclude particular consumers based on their personal characteristics. The thesis outlines a geography of regional financial centres, and suggests that the power of these centres has, until now been understated, and that although these centres are not as dynamic as London, the credit risk decisionmaking performed in these centres, underpins the credit quality of mortgages and RMBS notes, which are later circulated though the international capital markets. In addition, the analysts that produce scorecards are frequently based in these regional financial centres which highlight how financial elites that wield financial power are not strictly limited to financial institutions within London, as these elites encode their knowledges into scorecards which determine which consumers are able to purchase a house with a mortgage and which assets are later restructured to form RMBS notes.
8.5. Research limitations
One limitation of the research is that the findings are not definitive and that the research should be considered as one thread situated amongst a wider web of discourses that can be used to raise new questions regarding credit scoring and securitisation. Subsequently, the thesis should be viewed as a partial reading of economic geography, securitisation, credit scoring and mortgage production, as a complete review of the UK mortgage and securitisation markets, situated against a historical background were beyond the means of the thesis. The findings were also limited by the following issues. Framing the research was complicated as the research began at the end of a decade of substantial growth within the housing markets, when securitisation was a celebrated financial tool for providing housing finance and asset growth for consumers and investment opportunities and increased profits for the financial sector. Subsequently, the financial sector‟s view of itself changed throughout the research process and some of the celebrated actors addressed in the research, such as securitisation and financial analysts had their reputations downgraded by their peers. As such, the responses of interviewees to certain questions changed over time as the industry began to re-evaluate securitisation and centralised lender business models, making it difficult to reconcile different views by different research participants over time.
An additional impact of the credit crunch on the research was the difficulty in accessing research subjects as the crisis deepened, which reduced the number of respondents willing to participate in the research. Although the recession provided some new opportunities for the research, criticism of the financial sector by the media made research access more complicated, especially as the visibility of market participants began to fade as the capital markets closed. For example, it became more difficult and time consuming to identify and contact UK RMBS investors, at a time when investors wanted to keep their exposures to RMBS investments secret, a problem which was exacerbated by the time limits placed on the project59. As such, research into the consumption of RMBS notes by investors was withdrawn from the project.
If I was to undertake the research again, there are several changes that could be implemented. As attempts to contact investors were time consuming and returned few interviewees willing to participate in the research, this time could have been used differently to expand on the following three areas of research. First, it would have been useful to gain greater access to investment bank structuring departments in order to determine if there were any differences in the development of securitisation structures by investment banks based on their different geographical origins. For example, did US investment banks have more experience in underwriting higher risk UK transactions than their European counterparts based on their experiences in US subprime securitisation, or did these investment banks use different features in their securitisation structures depending on their attitudes to the risks inherent in securitisation? It was challenging to enrol research respondents from structuring departments and it would have been useful to have attempted to contact structurers that had been made redundant during the recession, in order to potentially gain a more critical review of the development of waterfall structures and any problems that were recognised by these actors, but that were not acted on by executives. Second, it would be useful to have explored other funding mechanisms in more detail, such as medium-term notes and covered bonds, to situate the importance of securitisation amongst other external funding techniques and to understand how reliant UK mortgage lenders were on capital market funding. The final change would seek to explore the development and implementation around credit rationing in the wake of the recession and the socio-technical engineering involved to develop an understanding as to how credit scoring is altered and monitored in relation to mortgage lender liquidity.
Finally, to draw the conclusion to a close, this research has sought to provide insight into the wider processes of capitalism and financialisation, though the dissemination and transplantation of business models, ideas and epistemic communities that circulate within specific spaces of financialisation. Marx may have forecasted the collapse of capitalism from its internal contradictions, but it was Braudel who provided the nuanced suggestion that capitalism will always be sick, but will never die (Froud et al. 2007:339). Perhaps what is important to understand about capitalism, and the disproportionate power wielded by economic elites, is their ability to create new financial products and technologies that are useful in reengineering capitalism, as investment banks, law firms and mortgage lenders have used credit scoring and securitisation to increase corporate returns. I have little doubt that old financial technologies and products will be modified, while new products and technologies will be devised to supplant the failure of the financial strategies that contributed to the credit crunch.
This research has attempted to historicise and highlight how the geographies of financial knowledges and their adoption is spatially uneven, determined by the compatibility of these knowledges and devices with particular political economies, and the politics of the actors that circulate these financial knowledges and technologies. The thesis has aimed to offer a modest contribution towards understanding financialisation and the production of consumer mortgages, that has sought to provided a narrative as to how the technologies of securitisation and credit scoring have reshaped the geographies of retail finance, and how the enhanced integration of the UK mortgage market into the international financial markets has exposed it to external shocks and systemic risks.
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