“Our results show that political connections play an important role in a firm’s access to capital. The effects of political ties on federal capital investment are strongest for companies with weaker fundamentals, lower liquidity and poorer performance "” which suggests that political ties shift capital allocation towards underperforming institutions.”
-Ran Duchin and Denis Sosyura, University of Michigan School of Business
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File this one under “Duh!”
U.S. banks that spent more money on lobbying, were politically connected with the Fed, or had close ties with Pols, were more likely to get government bailout money.
That stunner is according to a new study released this week by two professors at the University of Michigan, Ross School of Business.
Profs Ran Duchin and Denis Sosyura paper also found that “TARP investment amounts” were positively correlated to banks’ political contributions and lobbying expenditures. Overall, the effect of political influence was strongest for the most poorly performing banks.
Here’s a Reuter’s excerpt:
“U.S. banks that spent more money on lobbying were more likely to get government bailout money, according to a study released on Monday.
Banks whose executives served on Federal Reserve boards were more likely to receive government bailout funds from the Troubled Asset Relief Program, according to the study from Ran Duchin and Denis Sosyura, professors at the University of Michigan’s Ross School of Business.
Banks with headquarters in the district of a U.S. House of Representatives member who serves on a committee or subcommittee relating to TARP also received more funds.
Political influence was most helpful for poorly performing banks, the study found.
Banks with an executive who sat on the board of a Federal Reserve Bank were 31% more likely to get bailouts through TARP’s Capital Purchase Program, the study showed. Banks with ties to a finance committee member were 26% more likely to get capital purchase program funds.”
Is there anyone in this country that finds this data remotely surprising . . . ?
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Sources: Banks and Bailouts: Playing politics? Ran Duchin and Denis Sosyura University of Michigan, 12/21/2009 Ross professors
http://www.bus.umich.edu/NewsRoom/ArticleDisplay.asp?news_id=18270
Banks with political ties got bailouts, study shows Steve Eder Reuters, Dec 21 2009
http://www.reuters.com/article/idCNN2124009320091221?rpc=44
sadly, sometimes you have to “state the obvious.” oh no, mr. bill!!
Bribery is bribery. We are just more sophisticated today; we use an indirect method and think nobody sees it.
Lobbying is nothing but a bribe.
Let me guess – they also got federal stimulus money to conduct this study? That would be the capper.
I was just about to post something like that Manny. Now taxpayers are paying for pointless studies on corruption.
Talk about a tax on a tax.
Just remember folks. When you think there is no other way for them to tax you they will find one. Just have a little faith and give it time
It is all tax payers money flowing through different hands. No wonder, these hands do not want to audit the Fed.
It isn’t that nobody sees it Wally, it’s just accepted.
We will never see sensible policies again until lobbying is outlawed, Congress are a bunch of 10 year olds waiting for the candyman. Maybe it is the future, I often wonder why “The Godfather” tops favorite movies, it seems organized crime is cool.
What ever happened to that congressional term limit movement from the ’90’s? I’ll bet that would flush out a lot of dead wood
This, along with the vote buying scam of a healthcare bill, have me at my low point of where I feel about politics.
You do not even hear talk of lobby reform in Washington anymore. The process is so ingrained that it is no longer considered wrong. Our government has become extremely corrupt, but no one seems to care. I admire Ms. Arianna H. She hits them hard on this kind of stuff.
Keep talking about it….that’s all you can do. It will change eventually. Many people with the mic want you to believe that blogs are second media somehow. This is where change starts these days.
I’m not sure, but I think the professors just proved that big banks got more TARP funds than small banks.
Hypocrisy:
I didn’t get elected to support a bunch of fat-cat bankers—–here is 23 trillion in money or allocations.
We can’t spend peoples tax dollars like it is Monopoly money—–here comes health care and a second stimulus that we will call a job program since the first stimulus was really a flop because it was fat.
What a joke, how to finish off the bankrupt corpse. Obama is an utter and absolute moron!
I have outrage fatigue. The best part of modern banking is that taking your money out of the big banks does nothing as the bank you DO put your money in will simply deposit the same money back into TBTF banks. Gotta love frac reserve!
I think that we’re just catching up to Europe on our collective cynicism with corrupt politicians and morally/ethically bankrupt corporate execs. In short, we’re growing up as a nation but doing it far “better” than our European counterparts. Ain’t it cute?
Dr. Frank Lutz, in his book "Words Work" said "it's not what you say, but rather what people hear"
In Vegas they call gambling"¦gaming, in Washington they call bribery"¦lobbying.
At the end of the day corruption is rampant and Harry Reid defines it as just good politics.
Either I missed this lecture or my Con Law Prof never included this concept under “equal protection of the laws”.
I guess some of us are more equal than others.
wow, nobody is breaking out any quotes from “Casablanca”, on this one?
Outside of the United States this is called corruption.
How about a parallel study which correlates Congresspersons funding versus their voting record? I believe that this would show a high degree of correlation also. I have met many of these folks over the years, amny of whom flew in on Corporate Gulfstreams. I found them, without exception, to be pompous, arrogant, ignorant and self-opinionated.
We the people? Give me a break.
Obama is about to discover that he has no constituency left. He did a “bait and switch” on the moderates, he has alienated the left wing, and most importantly in my book, he has shown no moral character in dealing with the banks, insurance companies or lobbyests. He has done nothing for the underclass or the middle class because he is too busy trying to be one of the elites. He does not understand the rules of the game. He attempts to “talk” people into doing what he wants and doesn’t understand that talk means next to nothing. He lacks the courage to stand for his convictions and too often he naively picks the wrong subjects to be convicted to. He is a shallow leader. He should be fighting for the welfare of the working class, but even in the health care debate, he avoids the moral discussions and caters to the rich and powerful rather than fighting for what is right. He will go down in history as the next Jimmy Carter. Great intentions but lacking leadership or character. In fact I think JC had a lot more character. JMO.
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