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

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  • Raghuram G. Rajan

    () (Booth School, University of Chicago, Chicago, Illinois 60637)

  • Rodney Ramcharan

    () (University of Southern California, Los Angeles, California 90089)

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 that congressmen in districts in which landholdings were concentrated and credit was costlier were significantly more likely to oppose the act. The evidence suggests that whereas 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. This paper was accepted by Amit Seru, finance .

Suggested Citation

  • Raghuram G. Rajan & Rodney Ramcharan, 2016. "Constituencies and Legislation: The Fight Over the McFadden Act of 1927," Management Science, INFORMS, vol. 62(7), pages 1843-1859, July.
  • Handle: RePEc:inm:ormnsc:v:62:y:2016:i:7:p:1843-1859
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    File URL: http://dx.doi.org/10.1287/mnsc.2015.2214
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.

    More about this item

    Keywords

    financial institutions: banks; finance; government: regulations;

    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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