Risk-category classification replaced individual screening as credit control logic

Evidence

Martha Poon has flagged this watershed as a shift from “credit-control-by-screening” to “credit-control-by-risk-category”; we just designate it “neoliberalism,” the latest installment in the surveillance of the modular entrepreneurial self. Indeed, by the late 1990s, FICO scores had become all-purpose quantitative proxies for your “worth” as a human being, rendering your debts comparable with those of a million others, incorporated directly into the models that served to justify stratification into the various trenches of the mortgage-backed securities that were one direct cause of the crisis. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 360

Categorization

• XREF: The screening-to-risk-category shift parallels the Milgrom/Roberts institutional economics reading where systems substitute for direct knowledge of traders — here it’s the state/creditor substituting categories for character. — connects to: Basel regulations displaced bankers’ practical credit judgment with statistical risk models — Ève Chiapello, Financialisation of Valuation, 63; Consumer credit judgement shifted from personal relationships to automated for-profit scoring — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 359; Categorization reduces uncertainty at a predictable cost to accuracy — , Rudman, Laurie A - On the Nature of…, 1158
• QUESTION: Worth tracing how FICO’s stratification maps onto the mortgage-backed securities tranches as a concrete mechanism connecting surveillance and the crisis.

Broader Connections

• Categorization reduces uncertainty at a predictable cost to accuracy #expands (0.75) — , Rudman, Laurie A - On the Nature of…, 1158