Introduction

Neoliberal financial growth did not just produce the kind of instability that could be effectively addressed within the institutional parameters of the neoliberal regime. The expanding networks of American financial power also produced interdependencies that the governance capacities consolidated during the neoliberal era were only poorly equipped to deal with. In a context of growing economic inequality, the penetration of financial forms and pressures into the fabric of everyday social life produced tremendous strains on the capacities of ordinary Americans to participate in this financial system and service their debts. In 2007, the American financial system was hit by a major crisis that started with the discovery of large amounts of “bad debt” in the “subprime” segment of the mortgage market and would evolve into the most serious economic downturn since the Great Depression. The Federal Reserve’s policy levers did not work the way they had during the past decades and market liquidity was not easily restored. Many commentators interpreted the situation as the inevitable outcome of America’s unsustainable financial practices, of the way it had been relying on speculation and excessive borrowing to stave off fundamental economic constraints. This chapter presents an alternative account of the nature of the crisis, analyzing it not in terms of the sudden imposition of accumulated financial pressures on a system that had been living beyond its means for decades, but in terms of the emergence of new contradictions within a regime of financial power characterized by its own internal institutional logic. The infrastructure of American finance was not fully configured and equipped to deal with these tensions, but this did not render the American state powerless by any means. If authorities were forced to deploy the full range of their institutional capacities, the effect of this was to preserve the integrity of America’s key financial institutions. Although this gives no guarantees for the future of American finance, it does mean that we should not examine present-day financial change through a focus on the alleged tendency of gyrating markets to overwhelm public capacities, but rather as ongoing, contradiction-ridden processes of institutional construction.