Politicizing consumer credit

Pat Akey, Rawley Z. Heimer, Stefan Lewellen

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)627-655
Number of pages29
JournalJournal of Financial Economics
Volume139
Issue number2
DOIs
StatePublished - Feb 2021

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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