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We study how lobbying affects the resolution of failed banks, using a sample of FDIC auctions between 2007 and 2014. We show that bidding banks that lobby regulators have a higher probability of winning an auction. In addition, the FDIC incurs higher costs in such auctions, amounting to 16.4 percent of the total resolution losses. We also find that lobbying winners have worse operating and stock market performance than their non-lobbying counterparts, suggesting that lobbying results in a less efficient allocation of failed banks. Our results provide new insights into the bank resolution process and the role of special interests.

Banks and Banking --- Finance: General --- Industries: Financial Services --- Public Finance --- Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior --- Studies of Particular Policy Episodes --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Financial Institutions and Services: General --- Portfolio Choice --- Investment Decisions --- National Government Expenditures and Related Policies: General --- Banking --- Finance --- Financial services law & regulation --- Public finance & taxation --- Loans --- Capital adequacy requirements --- Distressed institutions --- Liquidity indicators --- Financial institutions --- Financial regulation and supervision --- Liquidity management --- Asset and liability management --- Expenditure --- Banks and banking --- Asset requirements --- Financial services industry --- Liquidity --- Economics --- Expenditures, Public --- United States