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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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Publication status: published as Mian, Atif & Sufi, Amir & Trebbi, Francesco, 2013. "The Political Economy of the Subprime Mortgage Credit Expansion," International Quarterly Journal of Political Science, now publishers, vol. 8(4), pages 373-408, October.
Handle: RePEc:nbr:nberwo:16107

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  1. 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. Deniz Igan & Thierry Tressel & Prachi Mishra, 2009. "A Fistful of Dollars," IMF Working Papers 09/287, International Monetary Fund.
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Cited by:
  1. James R. Barth & Apanard Penny Prabha & Wenling Lu, 2014. "Do Interest Groups Unduly Influence Bank Regulation?," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 11(4), pages 19-25, 01.
  2. Deniz Igan & Prachi Mishra & Thierry Tressel, 2012. "A Fistful of Dollars: Lobbying and the Financial Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 195 - 230.

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