(gentle music)
Narrator: When a new bank branch opens in your neighborhood, it can feel like a win for the community. More credit access, local jobs, and a sense that your town is on the rise. But what if that shiny new branch wasn’t opened for you? What if it was opened for your congressperson?
Research from Chicago Booth’s Mihir Mehta and his coauthors finds that banks with more than $250 billion in assets strategically open branches in the districts of politicians who sit on the House Financial Services Committee, and they do it right before elections.
The pattern is deliberate. These openings don’t happen as much in nonelection years, and branches don’t open in districts of other powerful politicians who don’t oversee banking.
While banks face strict rules on how they can contribute to political campaigns, there are no rules about where they choose to open branches, and physical branches send a clear public message: We’re here and we support this district.
Politicians welcome new branch openings because they help stimulate local economies. What do the banks get out of it? The study finds that one potential benefit for banks opening branches in these districts is a reduction in regulatory enforcement in the following year—significant because the very politicians whose districts get the new branches oversee the regulators.
The researchers estimate that these politically motivated branches represent between 5 and 7 percent of all pre-election bank openings, totaling up to $35 million in investment per election cycle. Unlike campaign donations, this investment leaves behind something tangible: a branch, a building, a footprint. The researchers say that that physical presence signals to politicians that the bank is serious about fostering a long-term relationship.
This research doesn’t claim that banks are buying votes, but it does show how capital investment can serve as a tool for influence—a quieter, more permanent form of lobbying. In a world where political influence is often invisible, a new bank branch may say more than we think.
