“Finance is always social” are the first words of this book on American mortgage credit history by Sarah Quinn, an assistant professor of sociology at the University of Washington. As an illustration of this social approach, the highlight of the book may be the third chapter, in which Quinn sketches out three strands of social thought that motivated financial schemes from the late 1800s. One strand is the laissez faire approach, in the form of a wave of unregulated farm mortgage securitization. Another strand views government control as essential for market functioning and broad access to credit, in the form of a proposal to issue currency collateralized by farm products. A third strand valorized the cooperative non-profit approach to finance that met with great success for long periods in American history, in the form of debt issuance mutually guaranteed by a group of farmers. In a parable of sorts, all three initiatives failed. The chapter underscores the diversity of social logics—a concept from sociology referring to the set of social rules by which people agree what they owe each other—in American financial history.

Although most of the book details the history of mortgage securitization in the United States, Quinn’s primary argument is really not about securitization, but rather about the political economy of mortgage credit policy. Quinn argues that credit policy is a common feature of American history because, by virtue of being off balance sheet and relatively neutral ideologically, credit policy encounters few objections in the veto-prone American political system. As a result, Quinn views credit programs as America’s functional equivalent of a European welfare state, even if they tend to socialize risk and private profits.

Quinn’s secondary argument, and rationale for devoting most of the book to securitization, is that securitization and federal credit programs influenced the development of one another. This nexus is mostly in the realm of social logic, that securitization and credit programs each gave rise to new concepts of what people can imagine owing to and sharing one another. This connection is not obviously special to securitization, or even mortgages, leaving some disconnect in the coupling of these topics together. One of the more concrete connections given in the book is the 1916 Federal Farm Loan Act, which set up a national system of farm mortgage securitization. Quinn views this legislation in part as a response to the collapse of the laissez faire farm securitization wave of the late 1800s.

I learned a lot from the arguments on credit policy, which draw on and add to well-developed ideas from sociology and political science. At the same time, I was left wondering about alternative hypotheses. The book strongly articulates that credit policies are “not aberrations in the system” but rather “a core aspect of how the system works,” presumably pushing back against an unattributed argument that such programs are temporary or exceptional. Yet, alternative justifications for credit policy are possible. In particular, if credit markets are subject to market failure, those market failures suggest a different, though not necessarily mutually exclusive, justification for policy. A clear candidate market failure would be asymmetric information, which is pervasive in securitization and therefore a natural point of connection between securitization and credit policy.

Indeed, borrowers, originators, securitization companies, and investors all have different information sets. Securitization markets have repeatedly collapsed when investors reassessed the creditworthiness of the securities they owned, especially in the face of aggregate shocks like nationwide declines in real estate prices. One way of addressing these concerns, ex ante, is a government imprimatur, regulation, or an implicit or explicit guarantee. In other words, securitization is prone to market failure, which government credit policy can address. Moreover, some historical episodes of credit policy seem clearly motivated by information asymmetries. One of the main impetuses for the creation of the Securities and Exchange Commission, for example, was the view that mortgage securitization companies misled investors during the 1920s. The SEC is briefly discussed in the book, as an example of laissez faire social logic meeting an end.

Quinn likens securitization to sausage making, turning undesirable cuts of meat into something more palatable for investors. This could be seen as a view informed by information asymmetry, but the interpretation is open to the reader. Normally a sausage metaphor implies that diners would lose their appetite if they had watched the sausage being made, implying a rather skeptical view of securitization. Another view might be that securitization smooths out risks and thereby creates value, even for uniformly high quality inputs. This metaphor, and the book, will give readers plenty to chew on.