Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms
AbstractThis paper provides a positive political economy analysis of the most important revision of the U.S. supervision and regulation system during the last two decades, the 1991 Federal Deposit Insurance Corporation Improvement Act (FDICIA). We analyze the impact of private interest groups as well as political-institutional factors on the voting patterns on amendments related to FDICIA and its final passage to assess the empirical importance of different types of obstacles to welfare-enhancing reforms. Rivalry of interests within the industry (large versus small banks) and between industries (banks versus insurance) as well as measures of legislator ideology and partisanship play important roles and, hence, should be taken into account in order to implement successful change. A divide and conquer' strategy with respect to the private interests appears to be effective in bringing about legislative reform. The concluding section draws tentative lessons from the political economy approaches about how to increase the likelihood of welfare-enhancing regulatory change.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7582.
Date of creation: Mar 2000
Date of revision:
Publication status: published as Randall S. Kroszner, Philip E. Strahan. "Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," in Frederic S. Mishkin, editor, "Prudential Supervision: What Works and What Doesn't" University of Chicago Press (2001)
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-03-06 (All new papers)
- NEP-CDM-2000-03-06 (Collective Decision-Making)
- NEP-HIS-2000-03-06 (Business, Economic & Financial History)
- NEP-IFN-2000-03-06 (International Finance)
- NEP-PBE-2000-03-06 (Public Economics)
- NEP-POL-2000-03-06 (Positive Political Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alberto Alesina & Geoffrey Carliner, 1991. "Politics and Economics in the Eighties," NBER Books, National Bureau of Economic Research, Inc, number ales91-1.
- Cécile Carpentier & Jean-Marc Suret, 2003. "The Canadian and American Financial Systems: Competition and Regulation," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 431-447, December.
- Friedrich Heinemann & Martin Schüler, 2004. "A Stiglerian View on Banking Supervision," Public Choice, Springer, vol. 121(1), pages 99-130, October.
- Heinemann, Friedrich & Schüler, Martin, 2002. "A Stigler View on Banking Supervision," ZEW Discussion Papers 02-66, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Mark Carlson & Kris James Mitchener, 2005.
"Branch Banking, Bank Competition, and Financial Stability,"
NBER Working Papers
11291, National Bureau of Economic Research, Inc.
- Carlson, Mark & Mitchener, Kris James, 2006. "Branch Banking, Bank Competition, and Financial Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1293-1328, August.
- Mark Carlson & Kris James Mitchener, 2005. "Branch banking, bank competition, and financial stability," Finance and Economics Discussion Series 2005-20, Board of Governors of the Federal Reserve System (U.S.).
- Gabriella Montinola & Ramon Moreno, 2001. "The political economy of foreign bank entry and its impact: theory and a case study," Pacific Basin Working Paper Series 2001-11, Federal Reserve Bank of San Francisco.
- Guohua Feng & Apostolos Serletis, 2009. "Efficiency and productivity of the US banking industry, 1998-2005: evidence from the Fourier cost function satisfying global regularity conditions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(1), pages 105-138.
- Braun, Matias & Raddatz, Claudio, 2007. "Trade liberalization, capital account liberalization and the real effects of financial development," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 730-761, September.
- Marco Pagano & Paolo Volpin, 2001.
"The Political Economy of Finance,"
CSEF Working Papers
76, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Enrico C. Perotti & Ernst-Ludwig von Thadden, 2004. "The Political Economy of Dominant Investors," Tinbergen Institute Discussion Papers 04-091/2, Tinbergen Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.