Post by Sapphire Capital on Dec 13, 2008 8:30:43 GMT 4
The Political Economy of the U.S. Mortgage Default Crisis
Atif R. Mian
University of Chicago - Graduate School of Business; National Bureau of Economic Research (NBER)
Amir Sufi
University of Chicago - Graduate School of Business
Francesco Trebbi
University of Chicago - Graduate School of Business
October 28, 2008
Chicago GSB Research Paper No. 08-17
Abstract:
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.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1304698_code753937.pdf?abstractid=1291524&mirid=2
Atif R. Mian
University of Chicago - Graduate School of Business; National Bureau of Economic Research (NBER)
Amir Sufi
University of Chicago - Graduate School of Business
Francesco Trebbi
University of Chicago - Graduate School of Business
October 28, 2008
Chicago GSB Research Paper No. 08-17
Abstract:
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.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1304698_code753937.pdf?abstractid=1291524&mirid=2