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Market-based lobbying berlusconi power and mediaset ads

New evidence on indirect lobbying

In new research (DellaVigna et al., 2014) we look at a different channel for the conflict of interest for politicians with business holdings. Specifically, we study whether third parties try to curry favour with conflicted politicians by shifting their business towards firms controlled by a politician. The politician benefits financially from the increased business, and the 3rd parties expect favourable regulation in exchange. We label this channel, involving lobbying through business proxies and which includes not received much attention in the literature, as ‘indirect lobbying’.

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Market-based bank capital regulation

Market-based bank capital regulation

Easy solutions won’t work

Simply doubling or trebling capital requirements won’t do. For instance, in 2008-11 the united states Federal Deposit Insurance Corporation (FDIC) lost money on 413 bank failures. Say that those banks – which required 6% core tier 1 regulatory equity to be classified as ‘well capitalized’ – each held a supplementary 14% of assets in cash, but no extra debt on your day they failed. This infusion could have been insufficient to cover losses in 372 (90%) of the cases. 2 Of course many of these banks were not at all hard; more technical large banks may have better risk management, but also more scope for trouble.