Risk-spreading strategies like securitization exacerbate agency abuse rather than reducing it.

Evidence

But these actions escalate problems of abuse as much as they reduce them (Sandler 1984; Bleakley 1985). They create new forms of collective agency. They increase the physical and social distance in agency relations, further impeding surveillance. They introduce new disabilities of expertise, since the second-order principals who repurchase risky transactions rarely have the particularistic risk-assessment experience possessed by the original. And they diminish the incentives for these first-order principals to enter agency relationships cautiously (so-called lending discipline in banking) because they are able to pass along these unwarranted risks to others (Sandler 1984). — Shapiro, Susan P., The Social Control of Impersonal Trust, 38

Categorization

• XREF: Directly anticipates the 2008 financial crisis logic — first-order lenders passing unwarranted risk to repurchasers. Connects to the reader’s knowledge of securitization and subprime mortgage collapse. — connects to: Principals spread risk through loans, reinsurance, and swaps to curb agent abuse. — Shapiro, Susan P., The Social Control of Impersonal Trust, 36; The same factors enabling agency relationships create the opportunity for agent abuse. — Shapiro, Susan P., The Social Control of Impersonal Trust, 33; Treating abuse transmission as inevitable was empirically wrong and actively harmful — , The Rod and the Child: A Global History…, 6954 (+5 more)
• SEED: Strong angle: how risk-transference technologies that promise safety systematically manufacture new, harder-to-detect forms of abuse — applies to derivatives, reinsurance, and modern fintech.
• ADDENDUM: Parallels the ‘Grafting & Growth’ piece’s theme of infrastructure that solves one problem by redistributing cost/risk elsewhere in a system.

Related

• Principals spread risk through loans, reinsurance, and swaps to curb agent abuse. (similarity 0.89)
• The same factors enabling agency relationships create the opportunity for agent abuse. (similarity 0.83)
• Loan securitization concentrated risk rather than eliminating it. (similarity 0.80)
• Structural opportunity for agent abuse does not explain why agents actually seize it. (similarity 0.78)

Broader Connections

• Disembedding mechanisms remove control from individuals and create collective risk #expands (0.85) — Anthony Giddens, The Consequences of Modernity, 310
• Structural opportunity for agent abuse does not explain why agents actually seize it. #expands (0.80) — Shapiro, Susan P., The Social Control of Impersonal Trust, 37
• Treating abuse transmission as inevitable was empirically wrong and actively harmful #qualifies (0.72) — , The Rod and the Child, 6954