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American Economic Review: Vol. 100 No. 5 (December 2010)


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The Political Economy of the US Mortgage Default Crisis

Article Citation

Mian, Atif, Amir Sufi, and Francesco Trebbi. 2010. "The Political Economy of the US Mortgage Default Crisis." American Economic Review, 100(5): 1967-98.

DOI: 10.1257/aer.100.5.1967


We examine the effects of constituents, special interests, and ideology on congressional voting on two of the most significant pieces of legislation in US economic history. Representatives whose constituents experience a sharp increase in mortgage defaults are more likely to support the Foreclosure Prevention Act, especially in competitive districts. Interestingly, representatives are more sensitive to defaults of their own-party constituents. Special interests in the form ofhigher campaign contributions from the financial industry increase the likelihood of supporting the Emergency Economic Stabilization Act. However, ideologically conservative representatives are less responsive to both constituent and special interests. (JEL D72, G21, G28)

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Mian, Atif (U CA, Berkeley)
Sufi, Amir (U Chicago)
Trebbi, Francesco (U British Columbia)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G28: Financial Institutions and Services: Government Policy and Regulation

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