The Paradox of the Global and the Local in the Financial Crisis of 2008: Applying the Lessons of Caritas in Veritate to the Regulation of Consumer Credit in the United States and the European Union
In his recent encyclical Caritas in Veritate, Pope Benedict XVI grapples with one of the most vexing paradoxes concerning the current global economic crisis. There is no question that it is a global financial crisis. The collapse of the subprime mortgage loan market in the U.S. in 2007 prefigured si...
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| Format: | Electronic Article |
| Language: | English |
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| Published: |
Cambridge Univ. Press
2010
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| In: |
Journal of law and religion
Year: 2010, Volume: 26, Issue: 1, Pages: 173-212 |
| Online Access: |
Volltext (lizenzpflichtig) Volltext (lizenzpflichtig) |
| Summary: | In his recent encyclical Caritas in Veritate, Pope Benedict XVI grapples with one of the most vexing paradoxes concerning the current global economic crisis. There is no question that it is a global financial crisis. The collapse of the subprime mortgage loan market in the U.S. in 2007 prefigured similar collapses of real estate bubbles in other parts of the world. The collapse of these real estate bubbles exposed the degree of interconnectedness among financial institutions across the globe created by the worldwide market for the derivate investment products created on the backs of the underlying real estate loans—the mortgage-backed securities in all their complex manifestations, and the credit default swaps that were essentially insurance policies on the risks of default of these securities. Various configurations of international coordinating bodies have called for global responses to the crisis. At its root, however, the current crisis is in a very important sense fundamentally a uniquely local phenomenon. It is the result of individual consumer transactions that are about as inherently local as a commercial transaction can ever get—loans to specific individual consumers tied to specific unique, unmovable pieces of residential real estate. Every single loan packaged into the bundles of investment opportunities that became "toxic assets" held by large institutional investors originated with a contractual relationship between an individual borrower and a single lender. In addition to the global macroeconomic consequences of the collapse of this market, every one of these loans that goes into default has personal consequences for the individual borrower whose home is the collateral for that loan. |
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| ISSN: | 2163-3088 |
| Contains: | Enthalten in: Journal of law and religion
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| Persistent identifiers: | DOI: 10.1017/S0748081400000941 |