Independent Regulators and Financial Stability: Evidence from Gubernatorial Campaigns and a Progressive Era Policy Experiment / Marco Del Angel, Gary Richardson.

Format:

Book

Author/Creator:

Del Angel, Marco.

Contributor:

National Bureau of Economic Research.

Richardson, Gary.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29938.

NBER working paper series no. w29938

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Regulatory independence forms a foundation for modern financial systems. To illuminate the value of this ubiquitous institution, we examine a Progressive Era policy experiment in which hitherto independent regulators came under gubernatorial supervision. After this change, failure rates declined during gubernatorial election campaigns for banks under gubernatorial jurisdiction. Declines did not occur during campaigns for other officials or for nationally chartered banks. Declines in bank resolutions during campaigns reduced business bankruptcies. We corroborate these claims with new data and novel IV regressions. Our results indicate that political subservience of financial regulators links electoral and economic cycles.

Notes:

Print version record

April 2022.