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Securitization in the U.S. Banking Industry
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This dissertation examines securitization in the U.S. banking industry before the financial crisis. It employs organizational political economy framework and offers a historical investigation on the relations between the state and the banking industry in the reconfiguration of political–legal and organizational arrangements related to securitization. I identify three specific arrangements that make securitization legal, viable, and favorable for banks: (1) the attack on Glass–Steagall, (2) the use of special purpose vehicles (SPVs), and (3) regulatory capital requirement. In light of the conceptual framework and historical contextualization, I argue there are three organizational causes of banks’ increasing engagement in securitization: (1) capital dependence, (2) organizational complexity, and (3) political activity. I collect organizational-level data of bank holding companies from 2001 to 2007 and perform descriptive and regression analysis to examine banks’ engagement in various forms of securitization and how the organizational causes proposed above shape securitization. The analysis lends support to the organizational political economy framework in general yet reveals a nuanced picture of the landscape of securitization in the U.S. banking industry. While certain forms of securitization have long been common practice and allowed under Glass–Steagall, other forms, typically involving higher risk, are newly legal and viable and quickly become favorable for banks after a series of reconfiguration of political–legal and organizational arrangements led by the largest banks. On one hand, banks hold more securities on their balance sheet to overcome higher capital constraint, because securities are more flexible and profitable and are treated more favorably in regulatory capital requirement. On the other hand, larger banks are more active in newly accessible opportunities, such as holding private-label securities and selling and securitizing assets, won by their political mobilization. They make up a disproportionately higher share in these forms of securitization among all banks, compared to conventional business of holdings securities issued or guaranteed by government agencies and government-sponsored enterprises. Banks set up new entities, including off-balance-sheet SPVs, to participate in these newly available businesses, accumulating risk within their increasingly complex organizational hierarchy and in the banking industry at large.
special purpose vehicle
organizational political economy
Hou, Dadao (2019). Securitization in the U.S. Banking Industry. Doctoral dissertation, Texas A & M University. Available electronically from