A Fistful of Dollars : Lobbying and the Financial Crisis / Deniz Igan, Thierry Tressel, Prachi Mishra.

Format:

Book

Government document

Author/Creator:

Igan, Deniz.

Contributor:

Mishra, Prachi.

Tressel, Thierry.

International Monetary Fund. Research Department.

Series:

IMF Working Papers; Working Paper ; No. 2009/287

IMF Working Papers

Language:

English

Subjects (All):

Global Financial Crisis, 2008-2009.

Lobbying--Law and legislation--United States.

Lobbying.

Financial crisesz--United States.

Financial crisesz.

Mortgage loans--Corrupt practices--United States.

Mortgage loans.

Physical Description:

70 p. : ill.

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2009.

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.

Contents:

Intro

Contents

I. Introduction

II. Related Literature

III. Empirical Approach

A. Lobbying and Loan Characteristics

B. Empirical Specifications

IV. Data Description

A. Mortgage Lending

B. Lobbying

C. Other Data

D. Construction of the Regressions Dataset

E. Summary Statistics

V. Results

A. Empirical Analysis of Loan-to-Income Ratio

B. Falsification Tests

C. Difference-in-Difference Estimations

D. Instrumental Variable Regressions and GMM

E. Evidence on Lobbying and Securitization and Mortgage Credit Growth

F. Lobbying and Delinquency Rates

G. Stock Price Returns during the Crisis

H. Discussion of Results

VI. Conclusion

Tables

1a. Targeted Political Activity Campaign Contributions and Lobbying Expenditures

1b. Lobbying by Financial Institutions and Lenders' Associations

2. Summary Statistics

3. Effect of Lobbying on Loan-to-Income Ratio

4. Effect of Lobbying Expenditures on Loan-to-Income Ratio

5. Effect of Lobbying on Loan-to-Income Ratio: Falsification Tests

6. Effect of Specific Issues Lobbying Expenditures: Differnce-in-Difference Strategy

7. Effect of Lobbying Expenditures on Loan-to-Income Ratio: Instrumental Variables

8. Effect of Lobbying Expenditures on Loan-to-Income Ratio - System GMM

9. Effect of Lobbying Expenditures on Proportion of Loans Sold

10. Effect of Lobbying Expenditures on Credit Growth

11.a. Effect of Lobbying on Loan Delinquency Rates

11b. Effect of Lobbying on Loan Delinquency Rates: Instrumental Variables

12. Lobbying and Abnormal Stock Returns

13. Evidence Inconsistent with Alternative Explanation

Figures

1. Lobbying ex/firm, by Sector, 2006

2. Evolution of Lobbying Intensity (expenditures per firm) Over Time

3. Lending Standards

4. Securitization

Appendix

Table

A1. List of Issues.

A2 Lobbying Report Filed by Bear Stearns

A3. Lobbying Report Filed by Bank of America

A4. Effect of Lobbying on Loan-to-Income Ratio: Additional Robustness Checks

References.

Notes:

"December 2009."

Includes bibliographical references.

Description based on print version record.

ISBN:

9786612844744

9781462398133

1462398138

9781282844742

1282844741

9781452726847

1452726841

9781451874327

1451874324

OCLC:

666237585