Journal Article
Powerful politicians can interfere with the enforcement of regulations. As such, expected political interference can affect constituents’ behavior.
Using rotations of Senate committee chairs to identify variation in political power and expected regulatory relief, the authors study powerful politicians’ effect on consumer lending to communities protected by fair-lending regulations.
The authors find a 7.5% reduction in credit access to minority neighborhoods in states with new committee chairs. Larger reductions occur in Community Reinvestment Act-eligible neighborhoods and when Senators serve on committees that oversee the enforcement of fair-lending laws.
Banks headquartered in powerful Senators’ states are responsible for the reduction in credit access.
