Working Paper: NBER ID: w17266
Authors: Raghuram G. Rajan; Rodney Ramcharan
Abstract: The McFadden Act of 1927 was one of the most hotly contested pieces of legislation in U.S. banking history, and its influence was felt over half a century later. This paper studies the Congressional voting behavior surrounding the Act’s passage. We find congressmen in districts in which landholdings were concentrated, and credit costlier were significantly more likely to oppose the act. The evidence suggests that while the law and the overall regulatory structure can shape the financial system far into the future, they themselves are likely to be shaped by elites, even in countries with benign political institutions.
Keywords: McFadden Act; banking legislation; land concentration; political influence; financial system
JEL Codes: G21; K2; N22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High credit costs and limited credit availability (G21) | Lower support for the McFadden Act (E64) |
| Land concentration (Q24) | Opposition to the McFadden Act (K37) |
| Rainfall patterns (Q54) | Land concentration (Q24) |