Academic journal article Economic Inquiry

The Intersection of Business, State Government, and Special Interests in Federal Legislation: An Examination of Congressional Votes on the Road to Interstate Branching

Academic journal article Economic Inquiry

The Intersection of Business, State Government, and Special Interests in Federal Legislation: An Examination of Congressional Votes on the Road to Interstate Branching

Article excerpt


Over the past 50 years, economists have developed the theory of legislative decision making. Based on utility maximization, the theory models the legislator's responses to constituent demands. The empirical verification of this economic theory began in the 1970s and continues today. This article contributes to the literature on voting behavior.

Silberman and Durden (1976) examined the 1973 votes to amend the Fair Labor Standards Act. Their analysis of minimum wage votes empirically tests for the influences by constituents affected by the passage of the legislation and finds a strong influence associated with special interest contributions of labor unions and small business. Rose (1978) uses Senate votes on the Helms Amendment of the Financial Institutions Act of 1975 to look at the influence of characteristics of state banking markets on voting behavior. With only one political variable (party affiliation) included in Rose's model, only weak evidence of the influence of senators (by the industry affected by the outcome of the vote) is rendered.

The results of studies published in the 1980s are mixed. Chappell (1982) finds evidence of the influence of constituent interests and personal ideology in an examination of eight votes affecting seven different industries; however, he did not conclude that special interest political contributions provide significant impacts. On the other hand, Frendreis and Waterman's (1985) analysis of the 1980 trucking deregulation bill provides results suggesting that senators are indeed influenced by political action committee (PAC) contributions.

As empirical research on voting behavior continued in the 1990s, the following studies examine votes in the House of Representatives. Stratmann's (1995) study of legislation associated with agricultural price supports provides further confirmation of the importance of special interest campaign contributions. The results presented in Colburn and Hudgins's (1996) study of regulation for the troubled thrift industry suggests that both political variables and financial variables characterizing the business affected by the legislation play roles in determining how a member of the House votes. Colburn and Hudgins provide evidence that PAC contributions, political ideology variables of the legislator, and the asset portfolio characteristics of the regulated thrifts influence the legislator's votes.

Empirical studies to date suggest, with mixed results, that legislators, with their own political ideologies, have been influenced by both the characteristics of their business constituents and special interests promoted by PAC contributions. This article examines the 1991 votes associated with interstate branching. These votes are particularly interesting for several reasons. First, the banking industry and hence banking special interest organizations would be split in their incentives to encourage or discourage the legislators to vote in favor of interstate branching. Second, the particulars concerning branching and banking within and across state boundaries have been determined by state legislators since the 1920s; this move to nationwide branching would take away states' abilities to protect their banks. Third, 1991 legislation comes on the heals of 1989 legislation calling for funds to deal with the thrift crisis, and federal legislators were criticized at length for legislation passed in the early 1980s that allowed the financial burden of the thrift crisis to increase in magnitude.

This study examines the influences on the voting behavior of members of the House and Senate by estimating a voting model with public choice variables (both ideological and special interest), variables capturing state banking laws, and business variables characterizing the affected banking industry in the congressional member's state. The focus is on congressional actions in 1991 resulting in a red light for interstate branching. …

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