A Comparison of Congressional House Voting on Banking Legislation across the Years

" A Comparison  of  Congressional House Voting on Banking Legislation across the Years:  The Changing Influence of Bank Lobbying, State Government,  and Party Affiliation"

(Abstract)

 In July, 2010 President Barack Obama signed into law the Wall Street Reform and Consumer Protection Act(WSRCPA).  This legislation begins a reversal of a trend in deregulation that began in the early 1980’s.  The banking industry, particularly large banks, have fallen from grace and been blamed for the financial crisis. The recent legislation has similarities to the Federal Deposit Insurance Corporation Improvement Act(FDICIA) that was passed in 1991 after numerous large and small banks had failed and depleted the FDIC’s fund.     Although passed almost twenty years apart, the concern for safety of our financial system was paramount at both points in time.    The House of Representatives served as the stage for the development of both acts and many issues were decided by roll-call voting on the floor making Congressional members accountable for their actions (and providing the data needed for an analysis such as this).            

This proposed comparison of voting behavior has the power to discern influences on votes that change over time from those that are stable across years.   We address this empirical question with an emphasis on 1) the different incentives for large versus small banks 2) the influence of the character of a state's banking industry, and 3) party-line voting.   

 Methodology: 

We assume a voting function exists of the form: V_i=V_i(I_i,C_i)

Where V_i represents the voting behavior of the House of Representatives’ member,  I_i represents the political pressure (influence) applied on the ith congressional member by different components of the financial industry, voters and political parties, and C_i represents a vector of banking characteristics, including the condition and character of banks in the  congressional member’s state.

The voting function is the foundation for the following basic binomial probit model for estimation:

 V_i=β₀ + ß₁PAC_i+ß₂DEM_i+ß₃ADA_i+ß₄ELEC%_i+ß₅SITE_i+ß₆TTLASSET_i+ß₇%TASMi+ß₈%TALG_i+ß₉BRCHPERBK_i+ß₁₀ROA_i+ß₁₁EQ/TA_i

            Where V_I is 0 or 1 for individual votes and the explanatory variables include:

PAC_i. = PAC contributions from banks

DEM_i, = categorical variable for Democratic Party

ADA_i, = ADA interest group rating 

ELEC%_i, = winning percentage in last election

SITE_i, = categorical variable for membership on relevant oversight committee

TTLASSET_i = assets in the state’s banks

BRCHPERBK_i  = average number of branches per bank in the state

%TASM_i = percentage of assets at small banks in the state

%TALG_i = percentage of assets at large banks in the state

ROA_i = average ROA for banks in the state

EQ/TA_i= average equity-to-total assets of banks in the state

These variables thought to influence the voting behavior of congressional members may be classified as being (i) public choice variables or (ii) variables characterizing banking in each state. Unlike prior studies of voting behavior that focus only on the significance of coefficients for a particular piece of legislation, our focus will be on how the influence can either change or remain stable over time.   The influences of greatest interest include bank lobbying efforts, the characteristics of banking in the state, and party-line voting.