Iceberg fields and shoal waters

“A well-regulated stock exchange is a phenomenal source of information for all market participants. It generates second-by-second data concerning the volume and price of trades, and its settlement system registers the identity of buyers and sellers. The analytic feats of the financial economists were themselves based on such data. Yet the advent of structured finance generated a gigantic volume of direct trades between institutions whose details were only known to the participants. These ‘over-the-counter’ transactions exceeded stock- exchange transactions by the turn of the millennium, and led the exchanges to skimp on procedure in order to remain competitive. Here we have both the cause of the credit crunch and the ultimate irony of the Western crusade to marketize the globe. A great wave of securitization aimed to turn even the most unpromising cash prospect, or intimate personal ambition, into a tradeable. It succeeded in submerging the world’s main capital markets in a deluge of non-performing and unpriced securities. The fog of grey capital descended on the financial districts, shrouding the great banks and clouding the view of investors and regulators alike.” – Robin Blackburn, “The Subprime Crisis”

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