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American Economic Review Vol. 100 No. 5 2010

The Political Economy of the US Mortgage Default Crisis

Atif Mian1; Amir Sufi2; Francesco Trebbi3

1 University of California, Berkeley, 545 Student Services Building, Berkeley, CA 94702 and NBER. · 2 University of Chicago Booth School of Business, 5807 S. Woodlawn Ave., Chicago, IL 60637 and NBER. · 3 University of British Columbia, 1873 East Mall, Vancouver, BC V6T1Z1, Canada and NBER.

Abstract

We examine the effects of constituents, special interests, and ideology on congressional voting on two of the most significant pieces of legislation in US economic history. Representatives whose constituents experience a sharp increase in mortgage defaults are more likely to support the Foreclosure Prevention Act, especially in competitive districts. Interestingly, representatives are more sensitive to defaults of their own-party constituents. Special interests in the form of higher campaign contributions from the financial industry increase the likelihood of supporting the Emergency Economic Stabilization Act. However, ideologically conservative representatives are less responsive to both constituent and special interests.

DOI
10.1257/aer.100.5.1967
Volume
100
Issue
5
Pages
1967-1998
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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