Who Is Responsible for the Financial Crisis? Lessons from a Separation Thesis

This chapter argues that a separation thesis was explicitly or implicitly beneath the entire subprime mortgage lending and transaction processes, and largely responsible for the resulting crisis. As the global financial crisis started from the subprime mortgage crisis in the United States of America in its earlier stage, a deep examination of the subprime mortgage crisis and its underlying thesis would help us understand the fundamental problems with the financial crisis. This chapter examines how the long-constructed separation thesis was reinforced and developed before and during the subprime mortgage crisis. While the separate entity thesis has been embedded in the whole corporate and social system, the subprime mortgage crisis serves as a vivid example to illustrate what the separation thesis is, how the separation thesis took shape in the business process, how the financial crisis was related to the separation thesis, what consequences of the separation thesis has produced, and what lessons can be learned from the crisis