High Finance, Political Money, and the U.S. Congress: A Quantitative Assessment of the Campaign to Roll Back Dodd-Frank

Thomas Ferguson (tomferguson@msn.com), Paul Jorgenson and Jie Chen (jie.chen@umb.edu)
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Thomas Ferguson: Institute for New Economic Thinking
Paul Jorgenson: University of Texas Rio Grande Valley
Jie Chen: UMass Boston

No 109, Working Papers Series from Institute for New Economic Thinking

Abstract: The extent to which governments can resist pressures from organized interest groups, and especially from finance, is a perennial source of controversy. This paper tackles this classic question by analyzing votes in the U.S. House of Representatives on measures to weaken the Dodd-Frank financial reform bill in the years following its passage. To control as many factors as possible that could influence floor voting by individual legislators, the analysis focuses on representatives who originally cast votes in favor of the bill but then subsequently voted to dismantle key provisions of it. This design rules out from the start most factors normally advanced by skeptics to explain vote shifts, since these are the same representatives, belonging to the same political party, representing substantially the same districts. Our panel analysis, which also controls for spatial influences, highlights the importance of time-varying factors, especially political money, in moving representatives to shift their positions on amendments such as the swaps push out provision. Our results suggest that the links between campaign contributions from the financial sector and switches to a pro-bank vote were direct and substantial: For every $100,000 that Democratic representatives received from finance, the odds they would break with their partys majority support for the Dodd-Frank legislation increased by 13.9 percent. Democratic representatives who voted in favor of finance often received $200,000 to $300,000 from that sector, which raised the odds of switching by 25 to 40 percent.

Keywords: banking and financial regulation; political economy; financial crisis; political parties; political money. (search for similar items in EconPapers)
JEL-codes: D72 G20 G38 K22 L5 N22 P16 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2020-01
New Economics Papers: this item is included in nep-cdm, nep-law, nep-pke and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:109

DOI: 10.36687/inetwp109

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