Winning Connections? Special Interests and the Sale of Failed Banks
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Summary:
We study how lobbying affects the resolution of failed banks, using a sample of FDIC auctions between 2007 and 2014. We show that bidding banks that lobby regulators have a higher probability of winning an auction. In addition, the FDIC incurs higher costs in such auctions, amounting to 16.4 percent of the total resolution losses. We also find that lobbying winners have worse operating and stock market performance than their non-lobbying counterparts, suggesting that lobbying results in a less efficient allocation of failed banks. Our results provide new insights into the bank resolution process and the role of special interests.
Series:
Working Paper No. 2017/262
Subject:
Asset and liability management Banking Capital adequacy requirements Distressed institutions Expenditure Financial institutions Financial regulation and supervision Liquidity indicators Liquidity management Loans
English
Publication Date:
November 22, 2017
ISBN/ISSN:
9781484330104/1018-5941
Stock No:
WPIEA2017262
Pages:
47
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