THE financial industry's lobbying about US mortgage rules may have contributed to the recent financial crisis and may pose a threat to the industry's stability, according to a report published by three International Monetary Fund economists.
The economists found that institutions that lobbied the most also had more lax lending standards, tended to securitise more of their mortgages and had faster-growing loan portfolios.
The delinquency rates were also higher in areas in which these companies' lending grew fastest, the report showed.
"Our analysis suggests that the political influence of the financial industry can be a source of systemic risk," Deniz Igan, Prachi Mishra, and Thierry Tressel said in the conclusion of their report.
"It provides some support to the view that the prevention of future crises might require weakening political influence of the financial industry or closer monitoring of lobbying activities."
Regulators worldwide are pressing companies to improve risk oversight after the world's biggest banks and brokerages reported more than $US1.7 trillion in write-downs and credit losses since 2007 tied to the global financial crisis.
In the US, the Government has extended the $US700 billion financial rescue program until October.
The authors favoured a "moral hazard" interpretation of their findings, where financial companies lobby seeking looser lending standards because they expect to be bailed out during a crisis or because they favour short-term gains.
The report noted that 16 of the 20 lenders that spent the most on lobbying between 2000 and 2006 received funds under the US Emergency Economic Stabilisation Act.
Spending by finance and real estate industry companies accounted for about 15 per cent of overall lobbying in any election cycle, the report said.
Spending on lobbying was $US479,500 per company in 2006, compared with $US300,273 for defence companies and $US200,187 for construction companies, the authors said.
Source:smh.com.au/
No comments:
Post a Comment