Financial firms that lobbied the federal government most on mortgage issues during the last decade also piled on the most risk, fueling a housing boom that eventually collapsed. They also had a greater chance of getting taxpayer money when the economy foundered, three economists at the International Monetary Fund said.

Financial firms benefited in using political influence to curb proposals to tighten restrictions on the U.S. lending market, the researchers found. Companies in the finance, insurance and real estate industry spent about $500 million on issues related to lending and securitization between 1999 and 2006, when 93 percent of all bills promoting tighter regulation never became law.

"There's some correlation that's going on with lobbying and risk taking, and that's linked to externalities which could be linked to financial crisis," said Deniz Igan, an IMF economist who co-authored the research published through the National Bureau of Economic Research. "They end up imposing costs on other agents in the economy, most notably the taxpayer."

During the past decade, inadequate lending standards, such as scant effort to verify a borrower's stated income, led to more and more substandard loans being bundled into investment-grade securities. Lobbying money intensified the process, lawmakers say, and the study found that the biggest spenders also had worse lending standards and bundled more mortgages into bonds to sell to investors.

"There is a great deal of lobbying, it has a great deal of influence on federal policy," said U.S. Rep. Brad Miller, D-N.C., in a phone interview. "They're showing up at the Washington fundraisers with a fat check in hand ... They're producing witnesses to testify at hearings. They're creating talking points for sympathetic members."

Lobbying in general has surged in recent months as agencies grapple with implementing the Dodd-Frank financial reform law that U.S. President Barack Obama signed 10 months ago, OpenSecrets.org, a Washington watchdog group, said.

Nearly 500 companies, trade associations, unions and other groups reported lobbying on Dodd-Frank during the first quarter of this year -- almost as many that lobbied during all of 2009, the year U.S. Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., introduced the legislation. OpenSecrets, run by the Center for Responsive Politics, didn't put a dollar figure to the lobbying.

In 2007, Miller reintroduced a 2004 bill supported by consumer groups to curb predatory lending practices, which also would have held financial companies that securitized mortgages liable for certain violations. According to the research conducted by Igan and her two co-authors, Prachi Mishra and Thierry Tressel, Bear Stearns and Co. spent $500,000 lobbying against Miller's bill and another piece of proposed mortgage legislation, neither of which became law.

The investment bank collapsed in March 2008 on speculation it was having liquidity problems as the mortgage market tanked.

Citigroup Inc., the lender that was given a $45 billion bailout from taxpayers, spent at least $3 million in 2003 to lobby the Treasury Department, the Bush administration and Congress on nine proposed laws, including a House initiative that would have increased disclosure requirements and limited fees on high-cost mortgages. That bill, the Predatory Lending Consumer Protection Act of 2001, never made it out of committee.

Citigroup spent about $43 million to lobby on specific mortgage credit issues between 2000 and 2006, the most by any firm surveyed by the IMF economists. More than one-third of the company's subprime loans issued in 2006 were delinquent in 2008, according to Igan. Citigroup declined to comment.

The company has spent at least $1.3 million this year lobbying on issues such as dealing with the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. -- Fannie Mae and Freddie Mac -- the mortgage-finance companies operating under U.S. conservatorship, according to government filings.

"Certain lenders were more likely to benefit from lax regulation," wrote Igan, Mishra and Tressel. "These lenders lobbied more aggressively; the ensuing lax regulatory environment let them take more risks and exposed them to worse outcomes during the crisis."

Those "worse outcomes" also exposed the public to commit $700 billion to a financial rescue fund and more than $1 trillion in federal stimulus spending. Home prices fell in March to the lowest level in eight years, according to the S&P/Case-Shiller index, as a backlog of foreclosures and 9 percent unemployment suggest prices may not recover in the near future.

To be sure, some of the firms that spent the most lobbying these issues -- Citigroup, Bank of America Corp., Merrill Lynch and Morgan Stanley -- were the largest and hence had the most to spend. And many other actors without the same political clout were operating with the same lust for short-term gains that Igan's research suggests guided securitizers and lenders, such as the speculator who flipped homes with an eye for easy profit.

Wright Andrews, a Washington attorney who lobbied on behalf of subprime lenders such as the National Home Equity Mortgage Association, says clients hid the extent to which credit quality had degraded even as they negotiated new federal mortgage rules with consumer groups.

Andrews said he began lobbying on mortgage-finance issues in the late 1990s, when a working group comprising industry representatives and consumer advocates began grappling with a system hampered by, for consumers, poor loan documentation and disclosure, and, for the industry, a patchwork of state regulations without clean-cut federal standards.

The mortgage-finance industry was open to compromise and not simply spending money to oppose any attempt at tighter regulation, said Andrews, but negotiations eventually stalled without a bill as home prices continued to surge during a period of easy credit and lax oversight.

"I feel like a sucker," Andrews said in his Washington office. "Even the best companies that had claimed to have these great policies and practices in place were not following them in a large number of cases. They were making loans that were pure crap, and were still claiming to us that the loans were OK."

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