[6 min 30 sec] – Innovation drives markets. But when innovation is left unharnessed and spreads too fast, regulation can’t keep up and innovation implodes. During the 2008 financial crisis, loose regulations at the institutional level combined with lenders’ “innovative” restructuring at the organizational level led to the de-stabilization of the mortgage market and its practices, according to research by Jo-Ellen Pozner at the University of California, Berkeley’s Haas School of Business.
“Organizations seeking profits from making bad mortgages and then securitizing them seems like a good idea for those making commissions, but when you aggregate that behavior to the institutional or industry level, you get a very dysfunctional industry,” says Pozner.
