Cross-ideological coordination by private interests: Evidence from mortgage market regulation under Dodd-Frank. (June 2020)

• Record Type: Journal Article
• Authors: Gordon, Sanford C.; Rosenthal, Howard
• Is Part Of: Business and politics. Volume 22:Number 2(2020)
• Page Start: 383
• Page End: 411
• Publication Date: 2020-06
• Subjects: Dodd-Frank, -- rulemaking, -- mortgage market regulation, -- interest groups, -- coalition-building; Business and politics -- Periodicals; Business planning -- Periodicals; Affaires et politique -- Périodiques; Entreprises -- Planification -- Périodiques; Business and politics; Business planning; Periodicals; 322.3
• DOI: 10.1017/bap.2019.17
• Languages: English
• ISSNs: 1369-5258

Abstract

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.