Some interesting papers from recent conferences.
There is no such thing as finance without politics! In Politicizing Consumer Credit, Pat Akey and co-authors show how exogenous
“promotions” of senators to committee chairman in the U.S. Senate result in more regulatory leniency in the senators’ home states vis-à-vis consumer lending by banks. Specifically, lending to disadvantaged groups (supposedly protected
by the Community Reinvestment and Equal Credit Opportunity Acts) decreases significantly, an effect independent of the senator being Republican or Democrat. One wonders though whether this only benefitted the banks in questions or also had a dampening
effect on the overindebtedness of risky borrowers.
Everyone talks about the geographically concentrated effect of Chinese imports into the U.S. on manufacturing employment.
Import Competition and Household Debt shows that areas that were more hit by Chinese imports and thus job losses in manufacturing saw a more rapid increase in household debt. Is this consumption smoothing or too slow adjustments to permanent
income shocks? Does consumer credit serve as opium of the 21st century? It certainly shows the powerful role of consumer credit and household debt in the socio-economic development of the US over the past two decades.