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The Making of Financial Regulation - Voting on Financial Regulation in the U.S. Congress Joo Rafael Cunha University of St Andrews The Making of Financial Regulation - Voting on Financial Regulation Paper Voting on Financial Regulation in

  1. The Making of Financial Regulation - Voting on Financial Regulation in the U.S. Congress João Rafael Cunha University of St Andrews The Making of Financial Regulation - Voting on Financial Regulation

  2. Paper Voting on Financial Regulation in the U.S. Congress Causal Direction & Long-term Perspective Campaign Contributions from the Financial Industry The Making of Financial Regulation - Voting on Financial Regulation

  3. Introduction - Motivation Determinants of Financial Regulation The Making of Financial Regulation - Voting on Financial Regulation

  4. Introduction Determinants of Financial Regulation Research Question: What Variables Influence Voting in Financial Regulation in the U.S. Congress? The Making of Financial Regulation - Voting on Financial Regulation

  5. Regulatory Explanations Public interest theory of regulation The Making of Financial Regulation - Voting on Financial Regulation

  6. Regulatory Explanations Public interest theory of regulation Private interest theory of regulation The Making of Financial Regulation - Voting on Financial Regulation

  7. Campaign Contributions from the Financial Sector Source: OpenSecrets The Making of Financial Regulation - Voting on Financial Regulation

  8. Regulatory Explanations Public interest theory of regulation Private interest theory of regulation Ideology The Making of Financial Regulation - Voting on Financial Regulation

  9. Regulatory Explanations Public interest theory of regulation Private interest theory of regulation Ideology Regulatory Cycle The Making of Financial Regulation - Voting on Financial Regulation

  10. Contribution Causal Direction Long-Term Perspective Business Cycles Motives of (Financial) Regulation The Making of Financial Regulation - Voting on Financial Regulation

  11. Legislation Tranquil Times Gramm-Leach-Bliley Act Commodity Futures Modernization Act of 2000 American Dream Downpayment Act passed in 2003 Financial Crises Financial Institutions Reform, Recovery, and Enforcement Act of 1989 Emergency Economic Stabilization Act Dodd-Frank Wall Street Reform and Consumer Protection Act The Making of Financial Regulation - Voting on Financial Regulation

  12. Data Since 1988 Roll Call Records Campaign contributions Ideology GDP growth Constituency Interests The Making of Financial Regulation - Voting on Financial Regulation

  13. Empirical Strategy Discrete dependent variable regression V iB = α + β 1 CC i + β 2 DWnom i + β 3 GDP s + β 4 PopFinance i + γ controls iB + s i + ε Political Variables as control The Making of Financial Regulation - Voting on Financial Regulation

  14. Results Table: Regressions Results - Deregulation (1) (2) (3) LPM MFX Probit MFX Logit b/se b/se b/se ln(Campaign Contributions 0.0584*** 0.0629*** 0.00994*** from Finance) (0.01) (0.01) (0.00) Ideology 1.315*** 1.311*** 0.221** (0.19) (0.20) (0.10) Real GDP growth 0.0932*** 0.0940*** 0.0154** (0.00) (0.00) (0.01) Fraction Population 3.261*** 3.526*** 0.602*** working in Finance, Insurance and Real Estate (1.08) (1.17) (0.21) Constant -0.581*** (0.13) Political Controls Yes Yes Yes Fixed Effects Yes Yes Yes R-sqr 0.116 N 6895 6895 6752 A */**/*** next to coefficient indicates significance at the 10/5/1% level. The Making of Financial Regulation - Voting on Financial Regulation

  15. Results Table: Regressions Results - Deregulatory Bills (1) (2) (3) LPM MFX Probit MFX Logit b/se b/se b/se ln(Campaign Contributions 0.0707*** 0.0688*** 0.0682*** from Finance) (0.01) (0.01) (0.01) Ideology -0.0299* -0.0300** -0.0350** (0.02) (0.01) (0.01) Real GDP growth 0.0112*** 0.0116*** 0.0116*** (0.00) (0.00) (0.00) Fraction Population -1.305*** -1.270*** -1.276*** working in Finance, Insurance and Real Estate (0.36) (0.34) (0.34) Constant 0.0969 (0.08) Fixed Effects No No No R-sqr 0.044 N 4055 4055 4055 A */**/*** next to coefficient indicates significance at the 10/5/1% level. The Making of Financial Regulation - Voting on Financial Regulation

  16. Results Table: Regressions Results - Regulatory Bills (1) (2) (3) LPM MFX Probit MFX Logit b/se b/se b/se ln(Campaign Contributions -0.00514 0.00174 -0.000479 from Finance) (0.01) (0.01) (0.01) Ideology -0.262*** -0.238*** -0.243*** (0.02) (0.02) (0.02) Real GDP growth 0.0398*** 0.0366*** 0.0401*** (0.01) (0.01) (0.01) Fraction Population -0.600 -0.556 -0.477 working in Finance, Insurance and Real Estate (0.45) (0.42) (0.42) Constant 0.921*** (0.12) Fixed Effects No No No R-sqr 0.031 N 2840 2840 2840 A */**/*** next to coefficient indicates significance at the 10/5/1% level. The Making of Financial Regulation - Voting on Financial Regulation

  17. Results Table: Regressions Results - Switching (1) (2) (3) (4) (5) (6) Switching Switching Switching Switching Switching MFX Probit MFX Logit Switching MFX Probit MFX Logit b/se b/se b/se b/se b/se b/se ln(Campaign Contributions 0.167*** 0.162*** 0.158*** 0.166*** 0.156*** 0.151*** from Finance) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) Real GDP growth -0.00890 -0.00753 -0.00705 -0.00582 -0.00374 -0.00251 (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) Fraction Population -4.078** -3.567** -3.627** -4.246** -3.756** -3.891** working in Finance, Insurance and Real Estate (1.93) (1.72) (1.70) (1.97) (1.75) (1.72) Constant -0.826* -0.814* (0.46) (0.49) Political Controls No No No Yes Yes Yes R-sqr 0.109 0.122 Pseudo R-sqr N 183 183 183 183 183 183 A */**/*** next to coefficient indicates significance at the 10/5/1% level. The Making of Financial Regulation - Voting on Financial Regulation

  18. Results Table: Regressions Results Split by Party (1) (2) (3) (4) (5) (6) MFX Logit MFX Logit LPM MFX Probit LPM MFX Probit Republicans Republicans Republicans Democrats Democrats Democrats b/se b/se b/se b/se b/se b/se ln(Campaign Contributions 0.103*** 0.113*** 0.0000547*** 0.0137 0.0163 0.00461 from Finance) (0.01) (0.01) (0.00) (0.01) (0.01) (0.00) Ideology 1.282*** 1.287*** 0.000612*** -0.267 -0.233 -0.0841 (0.21) (0.22) (0.00) (0.50) (0.49) (0.10) Real GDP growth 0.0870*** 0.0913*** 0.0000435*** 0.103*** 0.101*** 0.0346* (0.01) (0.01) (0.00) (0.01) (0.01) (0.02) Fraction Population 2.525 2.953* 0.00152** 3.955** 4.130** 1.397* working in Finance, Insurance and Real Estate (1.54) (1.66) (0.00) (1.56) (1.62) (0.72) Constant -1.536*** -0.0739 (0.19) (0.23) Political Controls Yes Yes Yes Yes Yes Yes Fixed Effects Yes Yes Yes Yes Yes Yes R-sqr 0.130 0.121 N 3551 3551 3492 3344 3344 3260 A */**/*** next to coefficient indicates significance at the 10/5/1% level. The Making of Financial Regulation - Voting on Financial Regulation

  19. Results Table: Regressions Results - Interaction Terms (1) (2) (3) (4) (5) (6) Vote Vote Vote Vote Vote Vote b/se b/se b/se b/se b/se b/se ln(Campaign Contributions 0.0388*** 0.0500*** 0.0483*** 0.0597*** 0.0396*** 0.0514*** from Finance) (0.01) (0.01) (0.01) (0.01) (0.01) (0.01) Ideology -0.909*** -0.124 0.165*** 1.205*** -0.771*** -0.129 (0.14) (0.31) (0.01) (0.20) (0.14) (0.30) Real GDP growth 0.0756*** 0.0928*** 0.0804*** 0.0967*** 0.0796*** 0.0954*** (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) Fraction Population -0.436 3.122*** -0.285 3.183*** -0.504* 3.073*** working in Finance, Insurance and Real Estate (0.29) (1.07) (0.27) (1.07) (0.28) (1.07) (ln(Campaign 0.0909*** 0.108*** 0.0807*** 0.102*** Contributions)) x (Ideology Score) (0.01) (0.02) (0.01) (0.02) (Ideology Score) x (Real -0.0353*** -0.0235*** -0.0284*** -0.0174** GDP growth) (0.01) (0.01) (0.01) (0.01) Constant 0.0787 -0.453*** -0.0382 -0.575*** 0.0724 -0.456*** (0.07) (0.13) (0.07) (0.13) (0.07) (0.13) Political Controls No Yes No Yes No Yes Fixed Effects No Yes No Yes No Yes R-sqr 0.110 0.122 0.105 0.117 0.111 0.123 N 6895 6895 6895 6895 6895 6895 A */**/*** next to coefficient indicates significance at the 10/5/1% level. The Making of Financial Regulation - Voting on Financial Regulation

  20. Results Average Marginal Effects of the Ln of Campaign Contributions from the Financial Industry with 95% CLs .06 .04 Effects on Pr(Vote=1) .02 0 −.02 −.75 −.25 .25 .75 Ideology The Making of Financial Regulation - Voting on Financial Regulation Source: OpenSecrets

  21. Results Average Marginal Effects of Real GDP Growth with 95% CLs .08 .06 Effects on Pr(Vote=1) .04 .02 0 −.75 −.25 .25 .75 Ideology The Making of Financial Regulation - Voting on Financial Regulation Source: OpenSecrets

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