Constituencies and Legislation: The Fight Over the Mcfadden Act of 1927

48 Pages Posted: 6 Aug 2011 Last revised: 11 Aug 2011

See all articles by Raghuram G. Rajan

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Rodney Ramcharan

University of Southern California, Marshall School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: August 2011

Abstract

The McFadden Act of 1927 was one of the most hotly contested pieces of legislation in U.S. banking history, and its influence was still felt over half a century later. The act was intended to force states to accord the same branching rights to national banks as they accorded to state banks. By uniting the interests of large state and national banks, it also had the potential to expand the number of states that allowed branching. Congressional votes for the act therefore could reflect the strength of various interests in the district for expanded banking competition. Unlike previous work, we find strong evidence of elite influence. We find congressmen in districts in which landholdings were concentrated (suggesting a landed elite), and where the cost of bank credit was high and its availability limited (suggesting limited banking competition and high potential rents), were significantly more likely to oppose the act. The evidence suggests that while the law and the overall regulatory structure can shape the financial system far into the future, they themselves are likely to be shaped by well organized elites, even in countries with benign political institutions.

Suggested Citation

Rajan, Raghuram G. and Ramcharan, Rodney, Constituencies and Legislation: The Fight Over the Mcfadden Act of 1927 (August 2011). NBER Working Paper No. w17266. Available at SSRN: https://ssrn.com/abstract=1905859

Raghuram G. Rajan (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4437 (Phone)
773-702-0458 (Fax)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-9299 (Phone)
773-702-0458 (Fax)

Rodney Ramcharan

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

Register to save articles to
your library

Register

Paper statistics

Downloads
35
Abstract Views
676
PlumX Metrics