Political Influence and TARP Investments in Credit Unions
26 Pages Posted: 3 Sep 2011
Date Written: September 1, 2011
Forty-eight credit unions received capital injections as part of the financial sector bailout. The predicted probability of receiving bailout funds jumps from 29 percent to 81 percent for the typical credit union, if the institution’s headquarters was in the district of a member of the U.S. House Financial Services Committee (HFS). The credit unions receiving funds were significantly less likely to lend out their deposits, contrary to the goals of the program. These results indicate that political influence may be an important determinant of which institutions receive taxpayer funds.
Keywords: bailout, cooperatives, credit unions, CDCI, CDFI, Community Development Capital Initiative, Community Development Financial Institution, EESA, Emergency Economic Stabilization Act, politics, subordinated debt, SBLF, Small Business Lending Fund, U.S. House Financial Services Committee, TARP
JEL Classification: G21, G28, G38
Suggested Citation: Suggested Citation