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Constituencies and Legislation: The Fight over the McFadden Act of 1927

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  • Raghuram G. Rajan
  • Rodney Ramcharan

Abstract

The McFadden Act of 1927 was one of the most hotly contested pieces of legislation in U.S. banking history, and its influence was felt over half a century later. This paper studies the Congressional voting behavior surrounding the Act’s passage. We find congressmen in districts in which landholdings were concentrated, and credit costlier were significantly more likely to oppose the act. The evidence suggests that while the law and the overall regulatory structure can shape the financial system far into the future, they themselves are likely to be shaped by elites, even in countries with benign political institutions.

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  • Raghuram G. Rajan & Rodney Ramcharan, 2011. "Constituencies and Legislation: The Fight over the McFadden Act of 1927," NBER Working Papers 17266, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17266
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    Cited by:

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    2. Raghuram Rajan & Rodney Ramcharan, 2015. "The Anatomy of a Credit Crisis: The Boom and Bust in Farm Land Prices in the United States in the 1920s," American Economic Review, American Economic Association, vol. 105(4), pages 1439-1477, April.
    3. William J. Byrd & John A. Dove, 2021. "Dismantling the south-west coalition: further evidence of distributive politics in preemption legislation," Economics of Governance, Springer, vol. 22(3), pages 193-214, September.
    4. Jihad Dagher, 2018. "Regulatory Cycles: Revisiting the Political Economy of Financial Crises," IMF Working Papers 2018/008, International Monetary Fund.
    5. Arthur Schram & Aljaž Ule, 2024. "Regulatory independence may limit electoral holdup but entrench capture," Public Choice, Springer, vol. 198(3), pages 403-425, March.
    6. Nicholas Borst, 2013. "Shadow Deposits as a Source of Financial Instability: Lessons from the American Experience for China," Policy Briefs PB13-14, Peterson Institute for International Economics.
    7. Maurizio Trapanese, 2020. "The regulatory cycle in banking: what lessons from the U.S. experience? (from the Dodd-Frank Act to Covid-19)," Questioni di Economia e Finanza (Occasional Papers) 585, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K2 - Law and Economics - - Regulation and Business Law
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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