از موسسات قرارداد جدیدی تا بازار سرمایه: نمره ریسک مصرف کننده های تجاری و ایجاد امور مالی وام مسکن بی پشتوانه

The investment fueled US mortgage market has traditionally been sustained by New Deal institutions called government sponsored enterprises (GSEs). Known as Freddie Mac and Fannie Mae, the GSEs once dominated mortgage backed securities underwriting. The recent subprime mortgage crisis has drawn attention to the fact that during the real estate boom, these agencies were temporarily overtaken by risk tolerant channels of lending, securitization, and investment, driven by investment banks and private capital players. This research traces the movement of a specific brand of commercial consumer credit analytics into mortgage underwriting. It demonstrates that what might look like the spontaneous rise (and fall) of a ‘free’ market divested of direct government intervention has been thoroughly embedded in the concerted movement of calculative risk management technologies. The transformations began with a sequence of GSE decisions taken in the mid-1990’s to implement a consumer risk score called a FICO® into automated underwriting systems. Having been endorsed by the GSEs, this scoring tool was gradually hardwired throughout the industry to become a distributed and collective ‘market device’. As the paper will show, once modified by specific GSE interpretations the calculative properties generated by these credit bureau scores reconfigured mortgage finance into two parts: the conventional, risk-adverse, GSE conforming ‘prime’ and an infrastructurally distinct, risk-avaricious, investment grade ‘subprime’.

At the tail end of 2006, the ‘subprime’ hit the news with a bang when default rates shot up in a segment of mortgage finance that had previously received little attention in mainstream reporting. Against rising central bank interest rates, and following the collapse of the housing bubble, borrowers bearing certain high-risk classes of loans ceased to maintain their repayment schedules. By the turn of 2007, the unanticipated inability of lenders to raise enough capital from borrowers impeded their own instalment payments to international residential mortgage backed securities (RMBS) holders. Major subprime lenders declared bankruptcy and several high profile hedge funds imploded. As regularized transnational circuits of capital flow broke down in the space of only a few months, the problem escalated into a financial credit crunch that soon took on global proportions. This series of all too recent and as yet ongoing events has made evident the long chain of financial connections that have come to co-ordinate the economic agencies of ordinary US homeowners with those of international capital investors. Those working at the intersection of ‘social studies of finance’ and ‘social studies of accounting’ (Miller, 2008) might immediately suspect that instabilities in the segment named ‘subprime’ have been accompanied by important organizational and infrastructural changes whose underlying significance, through disruption, are perhaps only now coming to light. One of the most dramatic of these transformations has occurred in the business of mortgage finance which sits at the nexus between the markets for real estate and those for asset backed securities. As emphasized by Federal Reserve Board Chairman Ben Bernanke in a speech responding to current events in the last ten years (quoted above), US mortgage finance has shifted from an industry driven by government sponsored enterprises (GSEs) and specialized deposit-funded lenders, to an industry fuelled in large part by high-risk investment capital. No longer the purview of local banks and savings co-operatives, consumer mortgages have become the asset class feeding some of the most popular debt securities for sale on Wall Street. The shift towards the unfettered involvement of private capital in mortgage lending and its downstream effects are becoming widely recognized in the US. A New York Times Magazine contributor who had just received a letter informing him that his mortgage obligations were being transferred to another financial group, expressed his personal sense of shock in this way: “…it came to me as a thunderous revelation: my debts were some other people’s assets” ( Kirn, 2006). In this spirit, the movement towards big capital has been tied to many of the most cited reasons in mainstream commentary for how mortgage credit became unsustainably amplified in the last few years. The profit driven interests of investment banks and hedge funds have ostensibly encouraged unscrupulous and irrational lending, fraudulent income reporting, a reduced responsibility towards the personal situation of borrowers. This was compounded by naïve borrowing in the face of increasingly complex financing options and negligence on the part of the federal agencies who should have been protecting consumers from predatory lending. Critiques such as these have been deployed in the style of a classic ‘sociology of errors’ ( Bloor, 1991), in which deviations from a retrospectively appropriate course of action are rooted out and condemned. Analyses of technical systems that focus on (human) error are fundamentally ‘asymmetric’ because they are confined to situations of breakdown or crisis. This is why the post hoc denunciation of deleterious actions triggered by this new brand of mortgage finance reads like a stale list of ‘the usual suspects’ – the ones that are routinely rolled out whenever there is an issue with crushing consumer indebtedness ( Black, 1961). This kind of reasoning leaves us open to two popular poles of argumentation: either to the ideologically driven conclusion that the current financial crisis is due to the natural excesses of free-marketeering run amock; or to a moralistic accusation that investment bankers allowed themselves to be seized by a greed-induced passion, a ‘contagious’ psychology of ‘irrational exuberance’ ( Shiller, 2005 and Shiller, 2008), that temporarily overcame their otherwise sound economic good sense. Either way, these perspectives sidestep the pressing contemporary question of how a financial network for lending so freely has come into being. Crisis or no crisis they fail to provide a compelling account of how these private capital players have managed to encroach, in practice, upon a marketplace the federal government has had to actively sustain, through specialized government sponsored agencies, since the New Deal. If government charters were once necessary to make the connections for liquid mortgage finance to exist – and in particular for making mortgage funding available to credit strapped populations – a move towards financial markets that sidesteps these entities cannot be sufficiently explained by a spontaneous ramping up of credit volume through supply and demand; and even less so by some kind of natural willingness among capital investors to cater to a consumer segment called the ‘subprime’. How has mortgage finance been rendered open to the practices of high-risk investment that appeal to big capital players? Surely, something might be said about the genesis and development2 of subprime finance as a novel network of investment grade lending in and of itself. It is perhaps of interest, then, to take a step back from the collapse and to investigate the implementation of new calculative infrastructures and their consequences on how mortgage finance is arranged. To track such a change means taking up the painstaking search into the most mundane of details so familiar to social studies of science (Bowker and Star, 2000 and Star, 1999) and of accountancy (Hopwood, 1987 and Hopwood and Miller, 1994); it means exploring the innovations that have re-configured markets, their machineries and their places (Beunza and Stark, 2004, Guala, 2001, Muniesa, 2000, Zaloom, 2006 and Çalişkan, 2007). In the case of the diffused industry of mortgage finance it means prying into the everyday apparatuses of underwriting and into the rise of consumer risk management techniques that have permitted a dramatic production of increased liquidity. Such an analysis would conclude that understanding subprime lending is less about unravelling the motivations and psychologies that might lead to financial overextension, than it is about understanding the development of technical apparatuses that have supported the practical activities of a new cadre of financial agents (Hopwood, 2000). Instead of questioning why so much mortgage credit was extended to borrowers at a high-risk of defaulting; instead of conflating the crisis with a set of culturally familiar categories such as the ‘poor’ or the ‘economically vulnerable’; instead of presuming to know what it is that is collapsing and offering calculatively empty, off-the-shelf reasons for why, this research traces the technical constitution of an investment subprime – at once a class of consumers, a set of ‘exotic’ mortgage products, and a class of mortgage backed securities – as a viable and fluid network of high-stakes financial action. It may be helpful to note that generating financial action of this type is substantially more complicated problem than single market formation (see, for example (Garcia-Papet, 2007)). In the case of mortgages, making debts fungible involves numerous transactions crosscutting what might be considered four distinct markets arenas: First, there is market for real estate where home buyers and sellers meet to exchange property. Next, there is the market for loans, where homebuyers receive credit from financial institutions. Third, there is the point of exchange between mortgage brokers and wholesalers who pool loans.3 Finally, there is the secondary market where pools of these mortgages are packaged by securitizing bodies and sold off to international investors as financial products. For the full circuit to function, money or credit flows transversally in one direction while what is known as ‘paper’ in the industry, or debt, flows in the other. This is an extraordinary problem of coordination that demands much more than a single interface where buyers and sellers meet. Consistent assessment is central to framing financial exchanges. In the absence of sustained calculation no financial action is possible, and there is little or no secondary mortgage market. To create liquidity in any circuit of mortgage finance – government sponsored or otherwise – numerous agents must come to similar understandings of the value of the asset backed paper so that it can be successive transferred between market participants. If the overarching problem is to organize heterogeneous actors to agree upon the qualities of goods (Callon, 1998a and Callon et al., 2002), then there is strong reason to suspect that the recent explosion of secondary subprime financial activity is the result of a process thorough which a novel chain of mortgage valuation has been put into place. Rather than assuming that calculation is a monolithic means to market organization, however, this research takes for granted that calculative activities are by nature disorderly – that is, that at the outset, there are as many potential solutions to a problem of valuation as there are participating agents. From this position, stories about paradigmatic shifts towards quantification, models, or risk management are inadequate explanations, for even if such movements could spontaneously occur, it is unlikely that agents working on a calculative problem independently, from different fields, would spontaneously come to the same evaluative results. To understand unprecedented subprime liquidity the empirical concern is to document the work that has been done to selectively reduce calculative multiplicity, particularly with regards to low quality loans. Instead of taking the uniformity of calculative frames from real estate to the secondary markets for granted, this paper will explore the importation of a distributed calculative (Hutchins, 1995) analytic apparatus into mortgage origination. In 1995, the GSE known by its nickname, ‘Freddie Mac’, adopted a commercially available consumer risk assessment tool called a FICO® credit bureau score which was originally designed to control risk in consumer credit (credit cards, small loans etc.). At that time, Freddie’s goal was simple and clear: it wanted to standardize underwriting practices in federally sanctioned, prime mortgage lending by introducing a consistent means of screening credit risk into its newly automated system. The paper follows the gradual, sequential and material movement4 of this specific risk management tool, the FICO®, as it spread from the GSEs throughout mortgage finance. It documents how, in redefining the calculation of prime quality, commercial scores simultaneously provided an expression of non-prime quality whose quantitative granularity was unprecedented. What this account intriguingly suggests is that the displacement of the New Deal institutions through the activation of capital players is not a result of inaction or inattention on the part of GSE managers. To the contrary, the intensification of high-risk lending has been built out of the GSE’s very own initiatives to wrest calculative control over mortgage finance.5 The key word is ‘built’. The GSE’s authoritative endorsement of a particular commercial solution to the problem of consumer credit risk assessment created the conditions of its widespread adoption. But this alone did not guarantee that all players would resort to the same risk management tool. Once marked by the government agencies’ authoritative interpretation and entrenched in their newly automated underwriting software, continuous infrastructural investment had to be made to ensure that FICO® scores would be taken up and used in similar ways across the industry. Ratings agencies such as Standard & Poor’s would, in turn, play an active role in stifling calculative diversity by translating the FICO® into non-government channels for securitization. The establishment of FICO® as a common calculative tool in mortgage making lead to clear changes in lending practices. As the paper will further show, once a common interpretation of these scores was achieved, a gradual shift away from traditional, exclusionary practices of credit control-by-screening and towards gradated practices of credit control-by-risk occurred. Where subprime lending required overriding the very judgment that was central to control-by-screening (since by definition a subprime loan was a mortgage that has been screened out), in a regime of control-by-risk, subprime lending became an exercise in risk management within a newly created space of calculative possibility. Under control-by-risk, managerial decision making was no longer confined to approving or withholding loans, but was extended to the exploitation of stabilized grades of credit quality accessed through scores to create multiple borrowing options tailored to accommodate varying levels of risk. This point is pivotal. It is through this calculative shift, enacted through FICO®, that the original GSE markets were circumvented by the development of a second, infrastructurally distinct circuit of high-risk mortgage investment known as the ‘subprime’.

This research is part of a broader project that seeks to draw attention to the introduction of default risk, established through new calculative apparatuses, in changing the nature of US consumer finance.59 By engaging with empirical details of how risk management tools are transmitted on the ground, the work emphasizes that shared forms of calculation do not arise spontaneously but must be established progressively through their insertion into local practices. Some may find it a strange conclusion, but the consequence of this observation is as follows: inherently superior qualities are not necessarily what allow some calculations to rise above the many other solutions to the problem of assessing risk. It is the idiosyncratic process of being reworked and implemented which might enable specific calculations to acquire a unique positioning that renders them effective agents of collective financial action. In the case discussed here, the infrastructural qualities of FICO® scores in mortgage finance were engineered through successive movement and translation as they spread across the industry. It is important to remember that at the outset, credit bureau scores were considered a sub-optimal, if not inappropriate tool for mortgage underwriting by scoring experts at Fair Isaac. Nonetheless they were a convenient solution to the problem of controlling credit quality, one that was perhaps cheaper and faster to implement than doing R&D. Adopted by Freddie Mac, commercially available credit scores entered into the mortgage industry to do a humble job of reinforcing extant practices of control-by-screening. The distinctive mark of 660 is a testimony of these limited intentions. Subsequently taken up by Fannie Mae, FICO® became part of a united GSE solution to evaluating credit quality. Scores were hardwired into proprietary automated underwriting software, and rapidly became a recognized piece of loan-making machinery. Facilitated, for example, by an enthusiastic partnership between Freddie Mac and S&P, FICO® was also hardwired into private automated underwriting software. In both financial circuits bureau scores smoothed out production. They provided vertical integration by allowing the quality of single loans and pools of loans to be expressed by the same risk metric. They also provided horizontal integration in that investors could now use the description in terms of FICO® to compare the value of complexly constructed securities. The scores bubbled with generative capacities, providing fresh material for financial innovation as they propagated throughout the industry. An empirical demonstration that the qualities of calculation are not deterministic, but must be acted upon and developed, the paper further describes how this potential was taken up differentially by the GSE and private label players. In the hands of the GSEs statistical scores continued to be used as a conservative screening device for selecting prime quality loans; in the hands of private label, however, they were used to developed risk managed products that exploited the newly risk quantified space of non-GSE lending. Coordinated by FICO®, a new regime of control-by-risk emerged. As exotic mortgage products and increasingly structured securities proliferated, the ‘non-prime’ – by definition excluded from investment, was transformed into ‘the subprime’ – a place of elevated return on investment. In the subprime, an alternative circuit of mortgage production supported by the rise of direct retail channels to consumers 60 and the bond rating agencies, capital players could now circumvent authoritative government sponsored apparatuses. They calculatingly poured money directly into asset backed paper based on consumer real estate. As investment capital flooded into housing, it crashed into two pillars: The fabled American Dream of homeownership, and the reputation of real estate as a safe and stable sector. These golden images, foraged in the days when the GSEs’ rule-based market making apparatus dominated mortgage finance, carried over untarnished even as information infrastructure was changing the nature of lending industry under everyone’s feet. Given that the mandate of the GSEs was to facilitate home ownership, it should come as no surprise that the success of subprime was initially heralded as a solution to the problem of affordable housing. The tensions that make democratic lending a puzzle in a regime of control-by-screening, seemed to dissolve away in a regime of control-by-risk. Yet what went overlooked was that the transition from low-risk exclusionary to high-risk inclusionary lending practices had transformed the very nature of homeownership. It intensified competition and raised properties prices by equipping more home buyers across the nation with immediate purchasing capability. Moreover, faced with complex choice sets it demanded that everyday people exercise degrees of financial judgment that had heretofore not been required of them. Readers searching for a smoking gun will no doubt find this account of the origins of subprime finance tremendously disappointing. It is admittedly counterintuitive to consider the onset of crisis from anything but the perspective of fault or error. But although it may be true, to take one example, that lax income statements ran rampant in the subprime business, it could also be expected that the age-old tactics of brokers would take on a renewed fervour as lending boomed. Misstated income is not new; what is new are the infrastructural conditions under which these misstatements have occurred. To belabour the point of underwriting error is to forget that the rationale of statistical automation was to minimize and overcome the virulence of precisely this kind of well-recognized ground level activity. A provocative hypothesis would be that such error could be expected to proceed unchecked and to increase exactly as it ostensibly did, once muted at the systemic level.61 In a world where multiple calculations and multiple frames of meaning are possible, what is an error at one moment can quickly become a non-error by the criteria of another, and vice versa. It is only by retreating to the rigid view of worthiness in control-by-screening that actions occurring in a regime of control-by-risk can be criticized as fundamental ‘errors’. This is the flaw of ‘error’ as a social scientific concept in situations that are in motion: it can only be fixed retrospectively and defined from an analytically external point of view. This paper has taken an altogether different approach to the subprime crisis. It has suggested that the explosion of the subprime was not caused by a sheer increase in lending volume stemming from irrational, fraudulent, or extra-governmental activity, but by the super-coordination of market actors’ decision-making around stabilized frames of risk provided by third party commercial consumer analytics companies. If risk is tied to the capacity to make decisions as Millo and Holzer (2005) have cogently suggested – that is to say, a decision not to lend at all is a zero risk decision – then the unfolding volatility of subprime finance as well as its amplified supply and demand would not be related to having misjudged or underestimated risk, so much as it would be generated by economic agents acting upon newly constituted risk-bearing entities materialized, shaped and described by FICO® credit bureau scores. It was not from a dearth of information (information asymmetry), but from the presence of innovative forms of digitized consumer risk scores that the infamous model of originate-to-distribute, of creating profit by pushing loans in volume onto the secondary markets, was put into practice. In this view, the protracted globe-spanning credit crisis beginning in 2007 should be studied first and foremost as the temporary achievement of a tightly calculated system of financial order, not as disorder. The contemporary financial turbulence is the empirical result of having engaged with novel conditions of calculative possibility.