Corporate Lobbying, Political Connections, and the 2008 Troubled Asset Relief Program

Abstract

Political involvement has long been shown to be a profitable investment for firms that seek favorable regulatory conditions or support in times of economic distress. But how important are different types of political involvement for the timing and magnitude of political support? To answer this question, we take a comprehensive look at the lobbying expenditures and political connections of banks that were recipients of government support under the 2008 Troubled Asset Relief Program (TARP). We find that firms that lobbied or had other types of political connections were not only more likely to receive TARP funds, they also received a greater amount of support earlier than firms that were not politically involved through lobbying or direct political connections. For every dollar spent on lobbying during the five years prior to the TARP bailout, firms received between $485.77 and $585.65 in TARP support.

Keywords: Lobbying, Corporate Bailouts, Government Policy, Regulation of Financial Institutions

JEL Classification: D72, D73, G28