Independent regulators and financial stability evidence from gubernatorial election campaigns in the Progressive Era

Marco Del Angel and Gary Richardson

Journal of Financial Economics, 2024, vol. 152, issue C

Abstract: Regulatory independence forms a foundation for modern financial systems. The institutions’ value is illuminated by a Progressive Era policy experiment when independent state-bank regulators came under governors’ supervision. Afterwards, bank resolution rates declined during gubernatorial election campaigns for banks supervised by state but not national authorities. This gubernatorial-campaign effect diminished by two orders of magnitude, but did not disappear, after the FDIC became the independent resolver for all insured banks in 1935. In addition, during the Progressive Era, declines in bank resolutions led to declines in business bankruptcy rates, an effect that is not observed in the FDIC era. Our findings indicate regulatory independence can dramatically reduce but may not eliminate politics’ impact on banks and the economy.

Keywords: Banks; Regulatory independence; Financial stability; Elections; Progressive Era (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X23002131
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:152:y:2024:i:c:s0304405x23002131

DOI: 10.1016/j.jfineco.2023.103773

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().