Bank Supervision and the Limits of Political Influence over Bureaucracy
Author(s)
Kunioka, Todd; Woller, Gary M.
Abstract
The purpose of this study is to investigate the efficacy of political influence over the bureaucracy. To investigate this question, we analyze the behavior and motivations of bank examiners from the three banking supervisory agencies during the so-called “credit crunch” of the early 1990s. During the period under study, repeated calls from Congress and two presidential administrations to ease up on examination practices went largely unheeded by examiners in the field. We identity several factors that limited the extent of political influence in this case: the existence of multiple principals, rational (material) and social incentives that favored toughness over leniency, and a culture of expertise that encouraged independent judgement over formulaic actions. Our findings are consistent with a body of literature that emphasizes the above factors in shaping bureaucratic behavior. We conclude, therefore, that models of congressional influence that ignore above factors are overly simplistic and likely to lead to erroneous conclusions about the nature and extent of political influence over the bureaucracy.
