The Federal Banking Regulators: Agency Capture, Regulatory Failure, And Industry Collapse During The 2008 Financial Crisis

THE FEDERAL BANKING REGULATORS: AGENCY CAPTURE, REGULATORYFAILURE, AND INDUSTRY COLLAPSE DURING THE 2008 FINANCIAL CRISISbyJUSTIN REXAugust 2013Advisor: Dr. Marjorie Sarbaugh-ThompsonMajor: Political ScienceDegree: Doctor of Philosophy This dissertation examines the process of agency capture at four federal bank regulatoryagencies leading up to the 2008 financial crisis: the Federal Deposit Insurance Corporation, theFederal Reserve, The Office of the Comptroller of the Currency, and The Office of ThriftSupervision. Though public administration and policy scholars have moved away from capturetheory toward a more pluralistic understanding of agency policymaking, recent events like theGulf oil spill, coal mining disasters, and the 2008 financial crisis have renewed attention to therole lax regulation plays in disasters and crises. As such, I set out to explore whether bankscaptured financial regulators, capture’s causes, and potential recommendations for improvingregulation.To do so, I relied on multiple methods of analysis to investigate three data sources: 1)content analysis of Office of Inspector General reports about regulatory problems preceding bankfailures, 2) interrupted time series analysis of trends in agency enforcement actions, and 3) astatistical comparison of the proportion of bank failures and bank bailout recipients supervisedby each agency.