The Political Economy of the U.S. Mortgage Default Crisis / Atif Mian, Amir Sufi, Francesco Trebbi.

Format:

Book

Author/Creator:

Mian, Atif.

Contributor:

National Bureau of Economic Research.

Sufi, Amir.

Trebbi, Francesco.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14468.

NBER working paper series no. w14468

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

We examine the determinants of congressional voting behavior on two of the most significant pieces of federal legislation in U.S. economic history: the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Emergency Economic Stabilization Act of 2008. We find evidence that constituent interests and special interests influence voting patterns during the crisis. Representatives from districts experiencing an increase in mortgage default rates are significantly more likely to vote in favor of the AHRFPA. They are precise in responding only to mortgage related constituent defaults, and are significantly more sensitive to defaults of their own-party constituents. Increased campaign contributions from the financial services industry is associated with a higher likelihood of voting in favor of the EESA, a bill which transfers wealth from tax payers to the financial services industry. We also examine the trade-off between politician ideology and constituent and special interests, and find that conservative politicians are less responsive to constituent and special interest pressure. This latter finding suggests that politicians, through ideology, can commit against intervention even during severe crises.

Notes:

Print version record

November 2008.