Independent regulators and financial stability evidence from gubernatorial election campaigns in the Progressive Era

• 成果类型: Article
• 署名作者: Del Angel, Marco; Richardson, Gary
• 署名单位: California State University System; California State University Los Angeles; Tsinghua University; National Bureau of Economic Research; University of California System; University of California Irvine
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2023.103773
• 发表日期: 2024
• 关键词: banks; Regulatory independence; Financial stability; ELECTIONS; Progressive Era

摘要

Regulatory independence forms a foundation for modern financial systems. The institutions' value is illuminated by a Progressive Era policy experiment when independent state-bank regulators came under governors' supervision. Afterwards, bank resolution rates declined during gubernatorial election campaigns for banks supervised by state but not national authorities. This gubernatorial-campaign effect diminished by two orders of magnitude, but did not disappear, after the FDIC became the independent resolver for all insured banks in 1935. In addition, during the Progressive Era, declines in bank resolutions led to declines in business bankruptcy rates, an effect that is not observed in the FDIC era. Our findings indicate regulatory independence can dramatically reduce but may not eliminate politics' impact on banks and the economy.