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The Political Economy of the Subprime Mortgage Credit Expansion

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  • Atif Mian
  • Amir Sufi
  • Francesco Trebbi

Abstract

We examine how special interests, measured by campaign contributions from the mortgage industry, and constituent interests, measured by the share of subprime borrowers in a congressional district, may have influenced U.S. government policy toward the housing sector during the subprime mortgage credit expansion from 2002 to 2007. Beginning in 2002, mortgage industry campaign contributions increasingly targeted U.S. representatives from districts with a large fraction of subprime borrowers. During the expansion years, mortgage industry campaign contributions and the share of subprime borrowers in a congressional district increasingly predicted congressional voting behavior on housing related legislation. The evidence suggests that both subprime mortgage lenders and subprime mortgage borrowers influenced government policy toward housing finance during the subprime mortgage credit expansion.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16107.

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Date of creation: Jun 2010
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Handle: RePEc:nbr:nberwo:16107

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  1. Deniz Igan & Thierry Tressel & Prachi Mishra, 2009. "A Fistful of Dollars: Lobbying and the Financial Crisis," IMF Working Papers 09/287, International Monetary Fund.
  2. Philippon, Thomas & Reshef, Ariell, 2009. "Wages and Human Capital in the U.S. Financial Industry: 1909-2006," CEPR Discussion Papers 7282, C.E.P.R. Discussion Papers.
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  7. Stratmann, Thomas, 2002. "Can Special Interests Buy Congressional Votes? Evidence from Financial Services Legislation," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 345-73, October.
  8. Micky Tripathi & Stephen Ansolabehere & James M. Snyder Jr, 2002. "Are PAC Contributions and Lobbying Linked? New Evidence from the 1995 Lobby Disclosure Act," Business and Politics, De Gruyter, vol. 4(2), pages 2.
  9. Peltzman, Sam, 1984. "Constituent Interest and Congressional Voting," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 181-210, April.
  10. Vikrant Vig & Amit Seru & Tomasz Piskorski, 2009. "Securitization and Distressed Loan Renegotiation: Evidence from the Subprime Mortgage Crisis," 2009 Meeting Papers 1169, Society for Economic Dynamics.
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Cited by:
  1. Deniz Igan & Prachi Mishra & Thierry Tressel, 2011. "A Fistful of Dollars: Lobbying and the Financial Crisis," NBER Chapters, in: NBER Macroeconomics Annual 2011, Volume 26, pages 195-230 National Bureau of Economic Research, Inc.

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