The Subprime Mortgage Crisis
Private Mismanagement of Public Infrastructure
This series reviews exemplary failures in the private management of public infrastructure. Private management of public infrastructure is common in modern democracies, and failures, while rare statistically, can be spectacular. It’s not obvious if such failures are becoming more or less common, but there are plenty to study, and they provide a point of reference in our scrutiny of these companies. In the spirit of a software engineering postmortem, the goal of studying previous failures is to avoid repeating them in the future.
Both Ponte Morandi and The Camp Fire are examples of grave public harm stemming from infrastructure mismanaged by a private entity. In both cases the impact was constrained to people in a specific geographic area. While physical infrastructure tends to be limited geographically, social networks know no such boundaries. Like social networks, the global financial system is ephemeral, geographically distributed public infrastructure. The 2008 Subprime Mortgage Crisis represents a failure en-masse of an entire segment of the U.S. economy with global consequences.
The Subprime Mortgage Crisis is an example of the collapse of an asset bubble, the correction phase of a common socio-economic phenomena in which a particular asset class becomes overvalued relative to intrinsic value…
