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

This paper addresses the question of regulatory rent seekingbased on protests of proposed bank mergers and acquisitionssubmitted by community groups to bank regulators. Theories ofCRA-related community group behavior based on benevolence andrent seeking, yield significantly different implicationsconcerning the effect of a bank's CRA rating on protestprobability, allowing for a clear test of the underlyingmotive for protest activity. The analysis shows: (1) protestsimpose significant time cost on merger and acquisitionapplications and (2) the benevolent-based theory must berejected in favor of the rent-seeking theory.