The Political Economy of the Subprime Mortgage Credit Expansion

43 Pages Posted: 9 Jun 2010 Last revised: 15 Jun 2010

See all articles by Atif R. Mian

Atif R. Mian

Princeton University - Department of Economics; Princeton University - Princeton School of Public and International Affairs; NBER

Amir Sufi

University of Chicago - Booth School of Business; NBER

Francesco Trebbi

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

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Date Written: June 9, 2010

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, politics, campaign contributions, lobbying

Suggested Citation

Mian, Atif R. and Sufi, Amir and Trebbi, Francesco, The Political Economy of the Subprime Mortgage Credit Expansion (June 9, 2010). Chicago Booth Research Paper No. 10-21, Available at SSRN: https://ssrn.com/abstract=1623004 or http://dx.doi.org/10.2139/ssrn.1623004

Atif R. Mian

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amir Sufi (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Francesco Trebbi

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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