One of the many lingering questions posed by the continuing meltdown of global finance concerns the role of securitization and the so-called shadow banking system in amplifying the scope of the crisis. As the crisis has revealed, a crucial function of many shadow financial units such as special purpose vehicles (SPVs) has been to make complex debt structures marketable and liquid. To what extent can the financial malaise of 2007 be attributed to the widespread use of such schemes? And how can this problem be conceptualized in contemporary political economy? In this paper we address these questions, examining the case of Northern Rock and its offshore SPV structure, Granite Master Trust. Drawing on the financial instability framework of Hyman Minsky, we find that the collapse of Northern Rock was caused by a confluence of two institutional trends in modern finance. First, it is the tendency of financial firms to exploit the regulatory gap by relying on financial innovation; second, it is the spread of the Ponzi culture as the defining mode of financing for today’s economic units. In this, the crisis of Northern Rock is symptomatic of a wider problem of today’s financial system where the process of securitization and liquefying debt structures is facilitated through the shadow financial system and often involves illicit practices, as well as outright fraud.¹