From Freakonomics: The Hidden Side of Everything blog comes a story about lobbying and it’s tie to the financial crisis. Citing information from the National Bureau of Economic Research, they said the following:
The answer is a firm yes, at least according to three IMF economists who studied the correlation between firms’ lobbying efforts, financial risk-taking, and default rates.
And then, citing the article (which you can find here):
[L]obbying was associated with more risk-taking during 2000-07 and with worse outcomes in 2008. In particular, lenders lobbying more intensively on issues related to mortgage lending and securitization (i) originated mortgages with higher loan-to-income ratios, (ii) securitized a faster growing proportion of their loans, and (iii) had faster growing originations of mortgages. Moreover, delinquency rates in 2008 were higher in areas where lobbying lenders’ mortgage lending grew faster.
Read this and more fascinating observations about “the hidden side of everything” here on the Freakonomics Blog.
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