Working Paper: NBER ID: w16107
Authors: Atif Mian; Amir Sufi; Francesco Trebbi
Abstract: We examine how special interests, measured by campaign contributions from the mortgage industry, and constituent interests, measured by the share of subprime borrowers in a congressional district, may have influenced U.S. government policy toward the housing sector during the subprime mortgage credit expansion from 2002 to 2007. Beginning in 2002, mortgage industry campaign contributions increasingly targeted U.S. representatives from districts with a large fraction of subprime borrowers. During the expansion years, mortgage industry campaign contributions and the share of subprime borrowers in a congressional district increasingly predicted congressional voting behavior on housing related legislation. The evidence suggests that both subprime mortgage lenders and subprime mortgage borrowers influenced government policy toward housing finance during the subprime mortgage credit expansion.
Keywords: Subprime Mortgages; Campaign Contributions; Government Policy; Housing Finance
JEL Codes: D72; G21; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased campaign contributions from the mortgage industry (G34) | More favorable voting patterns on housing-related legislation (R21) |
| Higher fraction of subprime borrowers in a district (G21) | Increased mortgage industry campaign contributions (G21) |
| Higher fraction of subprime borrowers in a district (G21) | More significant predictor of congressional voting behavior on housing legislation (R21) |
| Campaign contributions (D72) | Voting patterns on housing-related legislation (R28) |