The Evolving Juridical Space of Harm/Value: Remedial Powers in the Subprime Mortgage Crisis

This paper engages John R. Commons’s arguments regarding the relationship between law and capitalism with the legal adjudication of the U.S. subprime mortgage crisis. As going concerns, subprime lenders have opened up ambiguities in the law regarding the application of earlier legal frameworks to new profit-making activities. As with Commons’s analysis of the nineteenth century legal reframing of property and value, this has promoted a range of legal projects that attempt to work through borrowers’ remedial claims against lenders. In his work, Commons expressed a high degree of optimism that new authoritative sources would expand public powers to balance the growing economic power of financial and industrial going concerns. I argue that the last decade has seen substantial narrowing in the legal remedies available to borrowers who claim to have been harmed through their exposure to the subprime market. Even as highprofile enforcement actions against large lenders seem to represent the expansion of public powers to balance corporate power, I argue that the legal doctrines employed in these actions narrowly structure borrowers’ remedial powers and employ certain legal techniques – most notably, a tendency to settle cases before trial and use of contract modifications – that transfer legal uncertainty back to borrowers and structure harm as legally unproblematic.