The Mortgage Meltdown as Normal Accident Wrongdoing

Abstract:     
We argue that the mortgage meltdown can be considered a “normal accident”. Our analysis suggests that the mortgage industry’s complex and tightly coupled technology made it vulnerable to failure, irrespective of the level of greed and fraudulent behavior exhibited by mortgage industry executives. Our normal accident analysis also suggests that insufficient regulatory oversight contributed to the debacle. But our analysis suggests that simply increasing the amount of regulation over the mortgage industry is unlikely to reduce its susceptibility to failure. Indeed, if inappropriately designed, increasing the amount of regulation could increase the likelihood of future failure.

Number of Pages in PDF File: 20

Keywords: mortgage meltdown, normal accidents, regulation of financial industry

JEL Classification: M14, A14

working papers series