The Partisanship of Financial Regulators

Abstract

We analyze the partisanship of Securities and Exchange Commissioners (SEC) and members of the Federal Reserve Board of Governors (Fed). 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 (1930-2016), we find that partisanship among SEC Commissioners rose to an all-time high in the most recent period. Finally, we document a negative relation between partisanship and future enforcement actions and rulemaking activity, consistent with partisanship leading to gridlock.

Keywords: Partisanship, Financial Regulation, Textual Analysis

JEL Classification: G1, G2