Bank of England, Threadneedle Street, London UK EC
Institutional Affiliation: The Graduate Institute of International Studies, Geneva Switzerland
Information about this author at RePEc
NBER Working Papers and Publications
|November 2016||Political Borders and Bank Lending in Post-Crisis America|
with Andrew K. Rose: w22806
We use spatial discontinuities associated with congressional district borders to identify the effect of political influences on American banks’ lending. We show that recipients of the 2008 public capital injection program (TARP) increased mortgage and small business lending by 23% to 60% more in areas located inside their home-representative’s district than elsewhere. The impact is stronger if the representative supported the TARP in Congress, was subsequently re-elected, and received more political contributions from the financial industry. Together, these results suggest that political considerations influence credit allocation in a politically mature system like the United States without the formal possibility of political interference in lending decisions, and that this influence is...