Banking crises and regulation in the United States

This dissertation shows three empirical results with respect to banking in the United States. First, the role special interest groups had in influencing the Glass-Steagall Act of 1933 is shown to be overemphasized. Second, the Gramm-Leach-Bliley Act of 1999 created a new class of financial institutions which were more likely to receive government assistance from the Troubled Asset Relief Program than other financial institutions. Lastly, increases in financial regulation such as the Dodd-Frank Act are shown to disproportionately hurt financial institutions that received government assistance during the 2007-08 crisis whereas deregulation is shown to benefit these financial institutions.;The first essay of this dissertation considers the role special interest groups (SIGs) had on the Glass-Steagall Act of 1933. The research shows that many SIGs were successful in achieving their policy positions in the final legislation. For example, all SIGs were particularly successful in advocating for deposit insurance, a claim that contradicts some previous literature. The literature typically singles out one particular group and makes a case for its relative importance. To address this question more robustly, a unique data set is created from correspondences sent to the main author of the Act, Senator Carter Glass. The correspondences were sent a few months before the bill was passed and detail the policy suggestion(s) they advocate for. The letters detail if the writer belonged to a SIG such as bankers, businessmen, or unit banks.;The second essay considers the role of financial institution characteristics for predicting bank failure or receiving government assistance. Two characteristics are of particular interest. First, the Gramm-Leach-Bliley Act of 1999 created a new class of financial institutions, financial holding companies, which are allowed to engage in joint banking practices such as commercial and investment banking. These types of joint banking practices had been banned under the Glass-Steagall Act of 1933. Financial holding companies are shown to have a higher probability of receiving government assistance during the financial crisis of 2007-08. Higher levels of derivatives trading are also shown to be associated with receiving government assistance. Lastly, proxies for bank failure that are used in the literature are checked for accuracy and shown to be unreliable predictors of actual bank failure.;The final essay shows that financial institutions that received government assistance from the Troubled Asset Relief Program (TARP) generally have negative impacts on their stock price during key points in the legislative process leading to Dodd-Frank. This is interpreted as market participants believing that the legislation would be bad for institutions that received TARP. A counterfactual is considered by analyzing the Gramm-Leach-Bliley Act in 1999 which was a relaxation of financial regulation. The market response to Gramm-Leach-Bliley events show that a relaxation in regulation is associated with positive impacts on stock prices for institutions that would one day receive TARP. Nearest-neighbor and propensity score matching methods are used to estimate these stock price differentials between financial institutions that received government assistance and those that did not.