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A Fistful of Dollars; Lobbying and the Financial Crisis

Deniz Igan, Thierry Tressel () and Prachi Mishra

No 09/287, IMF Working Papers from International Monetary Fund

Abstract: Using detailed information on lobbying and mortgage lending activities, we find that lenders lobbying more on issues related to mortgage lending (i) had higher loan-to-income ratios, (ii) securitized more intensively, and (iii) had faster growing portfolios. Ex-post, delinquency rates are higher in areas where lobbyist' lending grew faster and they experienced negative abnormal stock returns during key crisis events. The findings are robust to (i) falsification tests using lobbying on issues unrelated to mortgage lending, (ii) a difference-in-difference approach based on state-level laws, and (iii) instrumental variables strategies. These results show that lobbying lenders engage in riskier lending.

Keywords: Economic models; Financial crisis; Financial crises; Financial sector; Financial institutions; Corporate sector; Political economy; Legislation; Loans; Housing; Global Financial Crisis 2008-2009; Governance; Lobbying, mortgage lending, mortgage, predatory lending, mortgages, consumer protection, (search for similar items in EconPapers)
Pages: 71
Date: 2009-12-01
New Economics Papers: this item is included in nep-pol and nep-ure
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Related works:
Journal Article: A Fistful of Dollars: Lobbying and the Financial Crisis (2012) Downloads
Chapter: A Fistful of Dollars: Lobbying and the Financial Crisis (2011) Downloads
Working Paper: A Fistful of Dollars: Lobbying and the Financial Crisis (2011) Downloads
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