Two economists contend they know the real reason why Congress has been unable to pass Glass-Steagall reform for more than two decades.
Randall S. Kroszner of the University of Chicago and Thomas Stratmann of Montana State University concluded in a new study that political interest groups have used campaign contributions to create a logjam in the House Banking Committee.
The study, which was presented last week at a Federal Reserve Bank of Chicago conference, found that banking groups contributed to the political campaigns of committee members who repeatedly voted in the industry's favor, while the insurance and securities businesses rewarded lawmakers who supported their views.
"You know what you are buying on the committee," Mr. Kroszner said during his presentation. "You focus your contributions on your supporters."
These repeated rewards caused lawmakers to firmly plant themselves in one industry's camp, the researchers said. The study also found that each industry continued to contribute to their supporters throughout their tenures, leading the researchers to conclude that lawmakers were not switching their allegiances. This steadfast support makes compromise on legislation difficult, the researchers said.
The study examined political contributions to all 435 members of the House during the 1987-88 electoral cycle. It found that commercial banks and their trade groups gave an average of $30,432 to banking committee members who supported their views. Insurance groups gave an average of $11,266 and securities firms $7,220 to their supporters.
The study also noted that the three interest groups combined to make 20% of all political contributions. "They are the largest single group, even bigger than agriculture," Mr. Kroszner said.
Industry observers, however, disputed the study. One observer, who requested anonymity, said the economists don't understand lobbying.
"The people who get money are the people who are important and who are influential," the observer said. "That is a function of their knowledge in an area, their ability to influence others, and the particular committees they are on."