TY - JOUR
T1 - Politicizing consumer credit
AU - Akey, Pat
AU - Heimer, Rawley Z.
AU - Lewellen, Stefan
N1 - Funding Information:
We thank Toni Whited (the editor), the anonymous referee, Andrew Bird, Matias Braun, Mehmet Canayaz, Francesca Cornelli, Ran Duchin, Pushan Dutt, Viktar Fedaseyeu, Jim Goldman, Matthew Gustafson, Sam Hanson, Edie Hotchkiss, Jiekun Huang, Candace Jens, Raymond Kan, Steve Karolyi, Nadya Malenko, Sahil Raina, Tom Ruchti, Rui Silva, Phil Strahan, Jason Sturgess, Adi Sunderam, Vikrant Vig, seminar participants at Alberta, Carnegie Mellon, DePaul, the Fed Board of Governors, LBS, Melbourne, Oklahoma, Toronto, UNSW, the University of Sydney, and the University of Virginia (Darden), and participants at the 2017 ASU Sonoran Winter Conference, 2017 ALEA Meetings, 2017 CEPR Spring Symposium, 2017 IDC-Herzliya Conference, 2017 ABFER Meetings, 2017 Universidad Católica de Chile Finance Conference, 2017 WFA Meetings, 2017 EFA Meetings, 2017 NFA Meetings, and the 2018 AFA Meetings for helpful comments. Charlotte Haendler and Timothy Stehulak provided excellent research assistance. Part of this research was conducted while Lewellen was an employee of London Business School and Carnegie Mellon University. Lewellen thanks the Research and Materials Development Fund at London Business School for financial support.
Funding Information:
We thank Toni Whited (the editor), the anonymous referee, Andrew Bird, Matias Braun, Mehmet Canayaz, Francesca Cornelli, Ran Duchin, Pushan Dutt, Viktar Fedaseyeu, Jim Goldman, Matthew Gustafson, Sam Hanson, Edie Hotchkiss, Jiekun Huang, Candace Jens, Raymond Kan, Steve Karolyi, Nadya Malenko, Sahil Raina, Tom Ruchti, Rui Silva, Phil Strahan, Jason Sturgess, Adi Sunderam, Vikrant Vig, seminar participants at Alberta, Carnegie Mellon, DePaul, the Fed Board of Governors, LBS, Melbourne, Oklahoma, Toronto, UNSW, the University of Sydney, and the University of Virginia (Darden), and participants at the 2017 ASU Sonoran Winter Conference, 2017 ALEA Meetings, 2017 CEPR Spring Symposium, 2017 IDC-Herzliya Conference, 2017 ABFER Meetings, 2017 Universidad Católica de Chile Finance Conference, 2017 WFA Meetings, 2017 EFA Meetings, 2017 NFA Meetings, and the 2018 AFA Meetings for helpful comments. Charlotte Haendler and Timothy Stehulak provided excellent research assistance. Part of this research was conducted while Lewellen was an employee of London Business School and Carnegie Mellon University. Lewellen thanks the Research and Materials Development Fund at London Business School for financial support.
Publisher Copyright:
© 2020
PY - 2021/2
Y1 - 2021/2
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=85089733589&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85089733589&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2020.07.017
DO - 10.1016/j.jfineco.2020.07.017
M3 - Article
AN - SCOPUS:85089733589
SN - 0304-405X
VL - 139
SP - 627
EP - 655
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 2
ER -