Daniel Roberts (APRW)

Speaker & Title

Daniel Roberts, "Local Dependence: Evidence from the Rollback of Dodd-Frank"

Abstract

A number of important US banks secured looser risk oversight when Congress rolled back the Dodd-Frank Act in 2018. Existing theories suggest that large US banks wield instrumental power to secure deregulation, but this rollback benefited smaller banks. I explain this with a theory of local dependence, arguing that geographically concentrated and represented firms use local disinvestment threats to influence policy. I hypothesize that local dependence on banks predicts representatives' votes for the rollback, and test this by linking district-level local dependence on banks, banks' instrumental influence, and roll-call votes. Results show that credible local threats to small banks' lending and regional banks' high-risk lending predicts rollback support, while instrumental influence only does when it accompanies prospective threats to local headquarters employment at regional banks. Qualitative evidence provides further support. To conclude, I outline directions for future research, interpret these American results in comparative perspective, and suggest implications for the politics of international risk regulation.