jump to navigation

Banks, risk and lobbying March 7, 2010

Posted by Jim Satterfield in Business & Society, Economics, Government.
trackback

In a working paper for the IMF, which is prefaced by a bit disclaiming that it actually represents the views of the IMF, we find this gem of a 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.

Aren’t we all just absolutely shocked?

Advertisements

Comments»

No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: