A Fistful of Dollars: Lobbying and the Financial Crisis
December 1, 2009
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Summary
Using detailed information on lobbying and mortgage lending activities, we find that lenders lobbying more on issues related to mortgage lending (i) had higher loan-to-income ratios, (ii) securitized more intensively, and (iii) had faster growing portfolios. Ex-post, delinquency rates are higher in areas where lobbyist' lending grew faster and they experienced negative abnormal stock returns during key crisis events. The findings are robust to (i) falsification tests using lobbying on issues unrelated to mortgage lending, (ii) a difference-in-difference approach based on state-level laws, and (iii) instrumental variables strategies. These results show that lobbying lenders engage in riskier lending.
Subject: Expenditure, Financial crises, Loans, Mortgages, Personal income
Keywords: lender-MSA level, loan characteristic, market share, mortgage lending, WP
Pages:
71
Volume:
2009
DOI:
Issue:
287
Series:
Working Paper No. 2009/287
Stock No:
WPIEA2009287
ISBN:
9781451874327
ISSN:
1018-5941
