At some point in the early months of 2007, the words ‘sub-prime mortgages’ began to filter into the popular press. By the end of that August, they were ubiquitous. This small section of the high-risk, high-yield housing finance market in the United States sparked a global financial and economic crisis that would scar a generation. The stories that emerged to explain how this happened were the stuff of fiction or perhaps something even stranger. Banks booked mortgages to people with no demonstrable assets or income, at introductory rates that quickly reset to terms that only the most resilient of households could afford. By the time the borrowers defaulted, however, the banks had sold the mortgages to other investors using complicated securitization instruments that effectively hid the risks involved. The institutions left holding the bag were not only unaware of the dangers the faced but completely unprepared for the consequences. In his powerful new book on The Political Economy of Housing Financialization, Gregory W. Fuller explains why that happened, how the dynamics differed across countries, and what we might do to anticipate similar crises in the future.
The political independence of the European Central Bank rests on three fictions. The first is that the ECB will make better policy over the longer-term than political considerations would dictate in the shorter-term. The second is that the costs of ECB monetary policy decisions will not fall consistently on the same groups. And the third is that disagreements within the ECB and its Governing Council are essentially technical and not political, meaning they are about how the economy really works and how it can best be managed, and not about who wins and who loses from one monetary policy decision to the next. These are fictions insofar as they rest on the assumptions that monetary policymakers are not politicians, that money is neutral over the longer-term, and that technical disagreements are somehow distinct (or distinguishable) from self-interest. The decision to appoint politicians to the top positions at the ECB because of their political skills challenges those assumptions. Along the way, such appointments necessarily bring the political independence of the ECB into question.
The European Parliament that will sit for the first time on 2 July 2019 is very different from the assemblies that came before it. More Europeans voted in the 2019 elections than ever before and with a higher rate of participation than we have seen since the 1990s. More votes were cast for parties outside the two main formations, the European People’s Party and the Socialists and Democrats. More new political parties have won representation, both from the right and from the left. And more uncertainty surrounds the group formation process and coalition building dynamics than we have seen since the first direct elections in 1979.