Politicizing consumer credit

Pat Akey, Rawley Z. Heimer and Stefan Lewellen

Journal of Financial Economics, 2021, vol. 139, issue 2, 627-655

Abstract: Powerful politicians can interfere with the enforcement of regulations. As such, expected political interference can affect constituents’ behavior. Using rotations of Senate committee chairs to identify variation in political power and expected regulatory relief, we study powerful politicians’ effect on consumer lending to communities protected by fair-lending regulations. We find a 7.5% reduction in credit access to minority neighborhoods in states with new committee chairs. Larger reductions occur in Community Reinvestment Act-eligible neighborhoods and when Senators serve on committees that oversee the enforcement of fair-lending laws. Banks headquartered in powerful Senators’ states are responsible for the reduction in credit access.

Keywords: Political connections; Consumer credit; Political economy; Household finance; Regulatory enforcement (search for similar items in EconPapers)
JEL-codes: G21 G38 G51 P16 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:139:y:2021:i:2:p:627-655

DOI: 10.1016/j.jfineco.2020.07.017

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