"Congressional Influence as a Determinant of Subprime Lending"
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Via Marginal Revolution, a study on New Century Financial Corporation, an Orange County subprime lender, whose collapse in early 2007 was the the first crack in the dam.
Congressional Influence as a Determinant of Subprime Lending 
Stuart A. Gabriel, Matthew E. Kahn, Ryan K. Vaughn 
NBER Working Paper No. 18965 
Issued in April 2013 
We apply unique loan level data from New Century Financial Corporation, a major subprime lender, to assess whether attributes of Congressional Representatives were associated with access to and pricing of subprime mortgage credit. Research findings indicate higher likelihoods of subprime loan origination and lower mortgage pricing among borrowers represented by the Republican and Democratic leadership of Congress. Black borrowers also benefitted from significantly larger loan amounts in those same districts. Also, borrowers received mortgage interest rate discounts in districts where New Century donated to the Congressional Representative. Findings provide new insights into the political geography of the subprime crisis and suggest gains to trade between New Century Financial Corporation and targeted Congressional Representatives in the extension, pricing and sizing of subprime mortgage credit.
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