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After the Great ComplacenceFinancial Crisis and the Politics of Reform$
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Ewald Engelen, Ismail Ertürk, Julie Froud, Sukhdev Johal, Adam Leaver, Mick Moran, Adriana Nilsson, and Karel Williams

Print publication date: 2011

Print ISBN-13: 9780199589081

Published to Oxford Scholarship Online: January 2012

DOI: 10.1093/acprof:oso/9780199589081.001.0001

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Financial Innovation or Bricolage?

Financial Innovation or Bricolage?

Chapter:
(p.37) Chapter 2 Financial Innovation or Bricolage?
Source:
After the Great Complacence
Author(s):

Ewald Engelen

Ismail Ertürk

Julie Froud

Sukhdev Johal

Adam Leaver

Michael Moran

Adriana Nilsson

Karel Williams

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199589081.003.0003

Chapter 2 considers the question of why so few people saw the 2007 financial crisis coming by developing Immanuel Wallerstein’s insight about how capitalism works though promises which mobilize supporters and seduce critics. We first explain how these extravagant new promises were made and accepted pre-2007, before turning to analyse how they failed to engage with the processes and outcomes of financial innovation. Our argument focuses attention on the ‘undisclosed’, or the gap between the promise of innovation and the catastrophic outcomes, including for taxpayers, of securitization in circuits which concentrated risk. The chapter then presents a different account of the framework and conjunctural conditions of innovation and argues that securitization through derivatives was a kind of bricolage which created a fragile latticework of counterparty obligations. In conclusion, the chapter highlights the ongoing risks of interconnectedness and exposure through derivatives markets in a highly concentrated banking sector.

Keywords:   financial innovation, bricolage, Claude Levi-Strauss, derivatives, securitization, CDOs

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