The Case for Regulatory Rent-Seeking: CRA Based Protests of Bank Mergers and Acquisitions

Marshall Gramm

Public Choice, 2003, vol. 116, issue 3-4, 367-79

Abstract: This paper addresses the question of regulatory rent seeking based on protests of proposed bank mergers and acquisitions submitted by community groups to bank regulators. Theories of CRA-related community group behavior based on benevolence and rent seeking, yield significantly different implications concerning the effect of a bank's CRA rating on protest probability, allowing for a clear test of the underlying motive for protest activity. The analysis shows: (1) protests impose significant time cost on merger and acquisition applications and (2) the benevolent-based theory must be rejected in favor of the rent-seeking theory. Copyright 2003 by Kluwer Academic Publishers

Date: 2003
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