The Partisanship of Financial Regulators

Abstract

We analyze the partisanship of Commissioners at the SEC and Governors at the Federal Reserve Board. Using the language-based approach of Gentzkow, Shapiro, and Taddy (Econometrica, 2019), we identify partisan phrases in Congress, such as “red tape” and “climate change,” and observe their usage among regulators. Although the Fed has remained relatively non-partisan throughout our sample period (1930-2019), we find that partisanship among SEC Commissioners rose recently to an all-time high, driven by more-partisan Commissioners replacing less-partisan ones. This recent partisanship at the SEC appears in both the language of new SEC rules and the voting behavior of SEC Commissioners.

Keywords: Partisanship, Financial Regulation, Textual Analysis

JEL Classification: G1, G2