IMF researchers have discovered that from 2000 to 2007, lenders who lobbied most strongly on mortgage-related legislation made more dangerous mortgage loans than those who lobbied less.
The researchers said their results led them to believe that lobbying may have been linked to lenders expecting or even getting special treatment from policymakers, causing them to engage in riskier lending behaviour.
"Using detailed information on lobbying and mortgage lending activities, we find that lenders lobbying more on issues related to mortgage lending (i) had higher loan-to-income ratios, (ii) securitized more intensively, and (iii) had faster growing portfolios. Ex-post, delinquency rates are higher in areas where lobbyist' lending grew faster and they experienced negative abnormal stock returns during key crisis events."
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