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The revolving door and worker flows in banking regulation

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  • Lucca, David
  • Seru, Amit
  • Trebbi, Francesco

Abstract

This paper traces career transitions of federal and state U.S. banking regulators from a large sample of publicly available curricula vitae, and provides basic facts on worker flows between the regulatory and private sector resulting from the revolving door. We find strong countercyclical net worker flows into regulatory jobs, driven largely by higher gross outflows into the private sector during booms. These worker flows are also driven by state-specific banking conditions as measured by local banks’ profitability, asset quality and failure rates. The regulatory sector seems to experience a retention challenge over time, with shorter regulatory spells for workers, and especially those with higher education. Evidence from cross-state enforcement actions of regulators shows gross inflows into regulation and gross outflows from regulation are both higher during periods of intense enforcement, though gross outflows are significantly smaller in magnitude. These results appear inconsistent with a “quid-pro-quo” explanation of the revolving door, but consistent with a “regulatory schooling” hypothesis.

Suggested Citation

  • Lucca, David & Seru, Amit & Trebbi, Francesco, 2014. "The revolving door and worker flows in banking regulation," Journal of Monetary Economics, Elsevier, vol. 65(C), pages 17-32.
  • Handle: RePEc:eee:moneco:v:65:y:2014:i:c:p:17-32
    DOI: 10.1016/j.jmoneco.2014.05.005
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    Citations

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    Cited by:

    1. Joël CARIOLLE & Elise S. BREZIS, 2015. "Financial Sector Regulation and the Revolving Door in US Commercial banks," Working Papers P122, FERDI.
    2. repec:spr:series:v:9:y:2018:i:1:d:10.1007_s13209-017-0171-z is not listed on IDEAS
    3. Vollmer Uwe, 2015. "‚Stairway to Heaven‘ oder ‚Highway to Hell‘? – Eine Einschätzung der Europäischen Bankenunion / ‚Stairway to Heaven‘ or ‚Highway to Hell‘? – An Evaluation of the European Banking Union," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 66(1), pages 147-174, January.
    4. Rafael Repullo, 2018. "Hierarchical bank supervision," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(1), pages 1-26, March.
    5. Lambert, Thomas, 2015. "Lobbying on Regulatory Enforcement Actions: Evidence from Banking," HIT-REFINED Working Paper Series 28, Institute of Economic Research, Hitotsubashi University.
    6. Eisenbach, Thomas M. & Lucca, David O. & Townsend, Robert M., 2016. "The economics of bank supervision," Staff Reports 769, Federal Reserve Bank of New York, revised 01 Jan 2017.
    7. repec:bla:obuest:v:79:y:2017:i:2:p:205-233 is not listed on IDEAS
    8. Ozlem Akin & Nicholas S. Coleman & Christian Fons-Rosen & José-Luis Peydró, 2016. "Political Connections: Evidence From Insider Trading Around TARP," Working Papers 935, Barcelona Graduate School of Economics.
    9. Barbosa, Klenio & Straub, Stéphane, 2017. "The Value of Revolving Doors in Public Procurement," TSE Working Papers 17-873, Toulouse School of Economics (TSE).
    10. repec:kap:pubcho:v:171:y:2017:i:1:d:10.1007_s11127-017-0402-7 is not listed on IDEAS
    11. Goldsmith-Pinkham, Paul & Hirtle, Beverly & Lucca, David O., 2016. "Parsing the content of bank supervision," Staff Reports 770, Federal Reserve Bank of New York.
    12. Mehmet I. Canayaz & Jose V. Martinez & Han N. Ozsoylev, 2015. "Is the revolving door of Washington a back door to excess corporate returns?," Koç University-TUSIAD Economic Research Forum Working Papers 1507, Koc University-TUSIAD Economic Research Forum.
    13. Koetter, Michael & Popov, Alexander, 2018. "Politics, banks, and sub-sovereign debt: unholy trinity or divine coincidence?," Working Paper Series 2146, European Central Bank.

    More about this item

    Keywords

    Banking regulation; Revolving door; Inter-industry worker flows;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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