中国地理科学(英文版) ›› 2012, Vol. 22 ›› Issue (3): 343-355.

• 论文 • 上一篇    下一篇

Roles of Financial Innovation and Information Technology: Lessons from US Sub-prime Mortgage Crisis and Its Implications for China

James H Lenzer Jr, Simon Xiaobin ZHAO   

  1. (International Center for China Development Studies & Department of Geography, Faculty of Social Sciences, the University of Hong Kong, Hong Kong, China)
  • 出版日期:2012-04-30 发布日期:2012-05-24

Roles of Financial Innovation and Information Technology: Lessons from US Sub-prime Mortgage Crisis and Its Implications for China

James H Lenzer Jr, Simon Xiaobin ZHAO   

  1. (International Center for China Development Studies & Department of Geography, Faculty of Social Sciences, the University of Hong Kong, Hong Kong, China)
  • Online:2012-04-30 Published:2012-05-24

摘要:

The mortgage loan has evolved from a local lending instrument into a major global security and its role is unparallel to other

financial instruments in the process of financial globalization. This paper explains how technology and financial innovation transformed the

mortgage loan from a local security into a premier global security traded worldwide. It examines the fundamental flaws of this process and

why it does not work in regards to mortgage lending and the re-securitization products that were created through financial innovation.

The findings show that regulation was unable to keep pace with financial innovation, which created an environment where actors in the

financial service sector were able to behave geographically irresponsibly by using information asymmetries to their advantage by

participating in moral hazard activities and engaging in other immoral and unethical business practices that were centered around

localized geography, which ultimately contributed to the global financial crisis.  It also examines the roll of financial innovation in regard to

the Lehman Brothers Mini-Bond in Hong and its role as a driving force behind China′s newly emerging shadow banking sector. It concludes

with a policy recommendation and its implication for China′s continued economic development.

关键词: shadow banking, US sub-prime mortgage crisis, financial tsunami, global financial crisis, wealth management vehicle, China asset bubble

Abstract:

The mortgage loan has evolved from a local lending instrument into a major global security and its role is unparallel to other

financial instruments in the process of financial globalization. This paper explains how technology and financial innovation transformed the

mortgage loan from a local security into a premier global security traded worldwide. It examines the fundamental flaws of this process and

why it does not work in regards to mortgage lending and the re-securitization products that were created through financial innovation.

The findings show that regulation was unable to keep pace with financial innovation, which created an environment where actors in the

financial service sector were able to behave geographically irresponsibly by using information asymmetries to their advantage by

participating in moral hazard activities and engaging in other immoral and unethical business practices that were centered around

localized geography, which ultimately contributed to the global financial crisis.  It also examines the roll of financial innovation in regard to

the Lehman Brothers Mini-Bond in Hong and its role as a driving force behind China′s newly emerging shadow banking sector. It concludes

with a policy recommendation and its implication for China′s continued economic development.

Key words: shadow banking, US sub-prime mortgage crisis, financial tsunami, global financial crisis, wealth management vehicle, China asset bubble