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Political Lending

Ahmed Tahoun and Florin Vasvari ()
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Ahmed Tahoun: London Business School
Florin Vasvari: London Business School,

No 47, Working Papers Series from Institute for New Economic Thinking

Abstract: Using a unique dataset provided by the Center for Responsive Politics (CRP), we document a direct channel through which financial institutions contribute to the net worth of members of the U.S. Congress, particularly those sitting on the finance committees in the Senate and the House of Representatives. These individuals report greater levels of leverage and new liabilities as a proportion of their total net worth, relative to when they are not part of the finance committee or relative to other congressional members. Politicians increase new liabilities by over 30% of their net worth in the first year of their finance committee membership. We do not find similar patterns for members of non-finance powerful committees. We find no evidence that finance committee members arrange new personal liabilities ahead of their appointments to the committees. Finance committee members also report liabilities with lower interest rates and longer maturities. Finally, focusing on banks that lend to U.S. Congress members, we find that the weaker performing financial institutions lend to more finance committee members and provide more new debt to these politicians. Our findings suggest that lenders may create political connections with finance committee members in an attempt to obtain regulatory benefits.

Keywords: U.S. Congress members; Finance Committee; Personal Debt; Information disclosure (search for similar items in EconPapers)
JEL-codes: C81 C83 D60 D63 D71 D72 G11 G21 G38 I31 I32 N30 O12 O15 P16 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2016-08
New Economics Papers: this item is included in nep-cfn, nep-pol and nep-sog
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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2817703 First version, 2016 (text/html)

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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:47

DOI: 10.2139/ssrn.2817703

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