The Case for Regulatory Rent-Seeking: CRA Based Protests of Bank Mergers and Acquisitions.

This paper addresses the question of regulatory rent seeking based on protests of proposed bank mergers and acquisitions submitted by community groups to bank regulators. Theories of CRA-related community group behavior based on benevolence and rent seeking, yield significantly different implications concerning the effect of a bank's CRA rating on protest probability, allowing for a clear test of the underlying motive for protest activity. The analysis shows: (1) protests impose significant time cost on merger and acquisition applications and (2) the benevolent-based theory must be rejected in favor of the rent-seeking theory. Copyright 2003 by Kluwer Academic Publishers