The economic costs of lobbying of financial institutions and mortgage companies in the U.S.

Larry Lessig tweeted a link about this. In 2009, an IMF research paper took a look at the consequences of lobbying by financial institutions and mortgage companies in the U.S.

IMF Working Paper, Research Department
A Fistful of Dollars: Lobbying and the Financial Crisis
Prepared by Deniz Igan, Prachi Mishra, and Thierry Tressel
Authorized for distribution by Stijn Claessens
December 2009

Among the author’s conclusions:

We show that lenders that lobby more intensively on these specific issues have (i) more lax lending standards measured by loan-to-income ratio, (ii) greater tendency to securitize, and (iii) faster growing mortgage loan portfolios. Ex post, delinquency rates are higher in areas in which lobbying lenders’ mortgage lending grew faster, and, during key events of the crisis, these lenders experienced negative abnormal stock returns.

A revised version was later published on March 21, 2011 as an NBER working paper with the same title, and which was a subject of this April 26, 2011 blog in the WJS.