Working Paper: NBER ID: w7582
Authors: Randall S. Kroszner; Philip E. Strahan
Abstract: This paper provides a positive political economy analysis of the most important revision of the U.S. supervision and regulation system during the last two decades, the 1991 Federal Deposit Insurance Corporation Improvement Act (FDICIA). We analyze the impact of private interest groups as well as political-institutional factors on the voting patterns on amendments related to FDICIA and its final passage to assess the empirical importance of different types of obstacles to welfare-enhancing reforms. Rivalry of interests within the industry (large versus small banks) and between industries (banks versus insurance) as well as measures of legislator ideology and partisanship play important roles and, hence, should be taken into account in order to implement successful change. A divide and conquer' strategy with respect to the private interests appears to be effective in bringing about legislative reform. The concluding section draws tentative lessons from the political economy approaches about how to increase the likelihood of welfare-enhancing regulatory change.
Keywords: No keywords provided
JEL Codes: D72; D78; G21; G28; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| private interest groups (D72) | voting patterns (D72) |
| intra-industry rivalry (large vs. small banks) (L19) | voting patterns (D72) |
| inter-industry rivalry (banks vs. insurance) (L19) | voting patterns (D72) |
| legislator ideology (D72) | voting patterns (D72) |
| partisanship (D72) | voting patterns (D72) |
| strategic lobbying (D72) | successful policy change (D78) |