The Mortgage Meltdown as Normal Accident Wrongdoing

20 Pages Posted: 20 Nov 2009  

Donald Palmer

University of California, Davis - Graduate School of Management

Michael W. Maher

University of California, Davis - Graduate School of Management

Date Written: October 16, 2009

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.

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

JEL Classification: M14, A14

Suggested Citation

Palmer, Donald and Maher, Michael W., The Mortgage Meltdown as Normal Accident Wrongdoing (October 16, 2009). Available at SSRN: https://ssrn.com/abstract=1313406 or http://dx.doi.org/10.2139/ssrn.1313406

Don Palmer (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
(530) 752-8566 (Phone)

Michael W. Maher

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-7034 (Phone)
530-752-0723 (Fax)

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