Politics Played Major Role in Bailout Choices

Politically connected banks likelier to get TARP funds
By Rob Quinn,  Newser Staff
Posted Dec 23, 2009 8:53 AM CST
Politics Played Major Role in Bailout Choices
A board seat at a Federal Reserve Bank was associated with a 31% increase in the likelihood of receiving CPP funds, researchers found.   (Shutter Stock)

Banks with ties to lawmakers were a lot likelier to get bailout cash than their less well-connected counterparts, according to a University of Michigan study unlikely to surprise bailout critics. Researchers crunching data on the 700 institutions that received TARP funds found that those with connections to members of congressional committees or execs who had served on Federal Reserve boards, fared better.

A connection to a member of a House finance committee was associated with a 26% increase in the likelihood of receiving funds from TARP's Capital Purchase Program. The effect of political influence was most apparent in the worst-performing banks, researchers found. The study also found that the amount of TARP cash companies received was strongly related to their spending on political donations and lobbyists.
(More TARP stories.)

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