Cross-ideological coordination by private interests: Evidence from mortgage market regulation under Dodd-Frank

Sanford C. Gordon, Howard Rosenthal

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Rulemaking pursuant to the 2010 Dodd-Frank Act provides a useful setting to assess theories of interest group influence. In the wake of the financial crisis, Congress delegated new rulemaking authority to federal agencies to regulate mortgage markets. A critical aspect of this new regulatory regime engendered significant controversy from affected interests: "credit risk retention" would require sponsors of asset-backed securities to retain a stake in the risk of securitized assets. Contrary to unrefined industry capture-based accounts stressing the disproportionate role of larger, well-established regulated entities in setting policy, we find little evidence of sustained effort by large lenders to dilute regulatory standards via political investments. Rather, a diverse coalition of housing sector, community, and civil rights groups, backed by an ideologically diverse swath of legislators, forced substantial regulatory retrenchment. Our analysis suggests a more nuanced view of private influence, in which coordination plays a more substantial role than political investments alone.

    Original languageEnglish (US)
    Pages (from-to)383-411
    Number of pages29
    JournalBusiness and Politics
    DOIs
    StateAccepted/In press - 2020

    Keywords

    • Dodd-Frank
    • coalition-building
    • interest groups
    • mortgage market regulation
    • rulemaking

    ASJC Scopus subject areas

    • Industrial relations
    • Political Science and International Relations

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